As output expands to larger and larger numbers, ______ continues to decline. (LO5) a) \(\mathrm{AFC}\) b) \(\mathrm{AVC}\) c) \(\mathrm{ATC}\) d) \(\mathrm{MC}\)

: 1. Average Fixed Cost (AFC): Fixed costs are costs that do not change as output increases or decreases. AFC is calculated as the Fixed Cost (FC) divided by the quantity of output (Q); AFC = FC/Q. 2. Average Variable Cost (AVC): Variable costs are costs that change as output varies. AVC is calculated as the Variable Cost (VC) divided by the quantity of output (Q); AVC = VC/Q. 3. Average Total Cost (ATC): Total cost is the sum of fixed costs and variable costs. ATC is calculated as the Total Cost (TC) divided by the quantity of output (Q); ATC = TC/Q. 4. Marginal Cost (MC): Marginal cost is the additional cost incurred when producing one more unit of output. Mathematically, MC = ΔTC/ΔQ, where ΔTC is the change in total cost and ΔQ is the change in output. #Step 2: Analyze how each cost measure behaves as output increases#

: 1. Average Fixed Cost (AFC): As output increases, AFC declines, because fixed costs are constant and spread out over more output. Thus, the larger the output, the lower the AFC becomes. 2. Average Variable Cost (AVC): The relationship between output and AVC varies depending on the production process and economies/diseconomies of scale. In general, AVC tends to decrease initially with increasing output, then increase at a certain point due to diminishing marginal returns. 3. Average Total Cost (ATC): ATC is a combination of AFC and AVC and similarly depends on the production process and economies/diseconomies of scale. However, the general trend for ATC is to decline initially, as the decrease in AFC outweighs any increase in AVC, and then start increasing after a certain point due to increasing AVC. 4. Marginal Cost (MC): The relationship between MC and output depends on the production process and economies/diseconomies of scale. MC tends to decrease with increasing output initially, but increase at a certain point due to diminishing marginal returns. #Step 3: Determine which cost measure consistently declines as output expands#

: Only Average Fixed Cost (AFC) consistently declines as output expands to larger and larger numbers, because fixed costs are constant and spread out over more units of output. The other cost measures (AVC, ATC, and MC) typically demonstrate an initial decrease and then an increase at a certain point due to diminishing marginal returns or diseconomies of scale. So the correct answer is: a) \(\mathrm{AFC}\)