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WAEC Economics 2020 Paper

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Question : 19

Total: 48

If the average fixed cost (AFC) of producing 5 bags of rice is \$20.00, the average fixed cost of producing 10 bags will be

$\$2.00$
$\$4.00$
$\$10.00$
$\$20.00$

Solution:

Concept:

Average fixed cost falls as output rises because total fixed cost remains constant and is spread over more units.

Explanation:

Given

AFC = \$20

when output is 5 bags.

Total fixed cost,

TFC = AFC \times Q = 20 \times 5 = \$100

.

Total fixed cost does not change with the level of output.

When output becomes 10 bags,

AFC = \dfrac{TFC}{Q} = \dfrac{100}{10} = \$10.00

.

Answer:

C.

\$10.00

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