What is the relationship between average fixed cost and output?
What will be an ideal response?
Because average fixed cost is equal to total fixed cost divided by the number of units of output and total fixed cost does not change with output, average fixed cost decreases as the level of output increases.
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Suppose a firm wanted to go out of business. The firm sells all its assets and pays off everything it owes to creditors. The stockholders would receive
A) nothing. B) their annual dividend payment. C) one half of the funds; the other half of the funds goes to bondholders. D) the rest of the funds, after everyone who has a claim against the firm is paid.
Refer to the figure below. Assume demand remains unchanged at D1. If supply shifts from S2 to S1, then the equilibrium price will ________ and the equilibrium quantity will ________. 
A. rise; rise B. rise; fall C. fall; fall D. fall; rise