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 Average fixed cost (AFC) is the amount of fixed cost per unit of the output produced. The calculation can be done using the fixed expenses formula:

Average Fixed Cost = Total Fixed Cost/ Quantity of Output.

As the production scale escalates, the average cost of fixed cost reduces since the same fixed cost is shared with more units. This is what is referred to as the spreading effect. Average fixed cost also assists the businesses to know how effectively they are spending their fixed resources and is significant in the short-run pricing and the cost analysis.