WAEC Economics 2015 Paper

Concept:The average fixed cost curve is not U-shaped; it continuously falls as output increases.Explanation:Average fixed cost is calculated as $\mathrm{AFC} = \frac{\mathrm{TFC}}{Q}$.Since total fixed cost does not change with output, increasing $Q$ makes $\mathrm{AFC}$ fall continuously.Therefore, the $\mathrm{AFC}$ curve is downward sloping and not U-shaped.In contrast, the average variable cost, average total cost, and marginal cost curves are U-shaped.They fall initially due to increasing returns, reach a minimum, and then rise due to diminishing returns.The U-shape of these curves reflects the law of variable proportions in production.Only the average fixed cost curve keeps declining as more units are produced.Answer:B. Average fixed cost curve