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AFC: The abbreviation for average fixed cost, which is fixed cost per unit of output, found by dividing total fixed cost by the quantity of output. Average fixed cost is one of three related cost averages. The other two are average variable cost and avarage total cost. Average fixed cost decreases with larger quantities of output. Because fixed cost is FIXED and does not change with the quantity of output, a given cost is spread more thinly per unit as quantity increases. A thousand dollars of fixed cost averages out to $10 per unit if only 100 units are produced. But if 10,000 units are produced, then the average shrinks to a mere 10 cents per unit.
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Lesson Contents
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Unit 1: The Method |
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Unit 2: Theory |
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Unit 3: Verification |
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Unit 4: Science and Practice |
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Unit 5: Cause and Effect | |
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Economic Science
In this lesson you'll see why and how the scientific method is a process of discovery. You'll see that it's a process of building theories to explain the workings of the world (the economy) by proposing then testing hypotheses. The five units making up this lesson will guide you through the basics of the scientific method and how it's used in the study of economics. - The first unit introduces the scientific method, especially its' four key components -- theories, principles, hypothesis, and data.
- The second unit then takes a closer look at theories, including the central role played by abstraction.
- In the third unit, we will focus on the process of verification -- how and why hypothesized relationships about the workings of the economy are compared with actual data.
- We then turn out attention to a simple example of how the scientific method is used to test a hypothesized relation between course grades and where students are seated in a classroom.
- The fifth and final unit in this lesson examines the role that cause and effect plays in the scientific method and economic science.
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AVERAGE FIXED COST Total fixed cost per unit of output, found by dividing total fixed cost by the quantity of output. When compared with price (per unit revenue), average fixed cost (AFC) indicates whether or not a profit-maximizing firm should shutdown production in the short run. Average fixed cost is one of three average cost concepts important to short-run production analysis. The other two are average total cost and average variable cost. A related concept is marginal cost.
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Only 1% of the U.S. population paid income taxes when the income tax was established in 1914.
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"If anything terrifies me, I must try to conquer it. " -- Francis Charles Chichester, yachtsman, aviator
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LF
Labor Force, Laissez-Faire
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