Discussion
Fixed cost per unit of output
Answer: A
Correct answer: falls as output rises
The total fixed cost is unchanged, so spreading it over more units reduces the amount each must bear:
\[ \text{fixed cost per unit} = \frac{F}{Q} \]This is the whole of what is meant by economies of scale in the short run, and it is why a plant running below capacity has such difficulty competing with one running full.
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