Question

True or False: An increase in xed cost increases the minimum-cost
output on a given short run average cost curve. Explain.

Answer 1

Fixed cost is the one that remains fixed and does not changes with the change in the level of output.

Average fixed is the per unit fixed cost. A rise in fixed cost also raises the average fixed cost at each level of output. Average cost is the sum total of average variable cost and average fixed cost. With the rise in average fixed cost at each level of output, average total cost also rises at each level of output. Thus, the minimum cost output (the point where average total cost is at its minimum) also rises.