What happens to average fixed costs if a firm's total fixed costs increase?

When a firm's total fixed costs increase, average fixed costs will rise as well. Average fixed costs are calculated by dividing total fixed costs by the quantity of output produced. If total fixed costs increase while the quantity produced remains constant, the average fixed cost per unit will also increase. This is because the same fixed costs are being spread over fewer units, leading to a higher cost allocation for each unit produced.

For instance, if a company has fixed costs of $100 and produces 10 units, the average fixed cost is $10 per unit. If the fixed costs then rise to $200 without any change in the quantity produced, the average fixed cost becomes $20 per unit, demonstrating a clear increase. This relationship highlights how fixed costs, being constant in total regardless of output level, affect average costs based on production levels.