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Business · Economics
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Refer to the following table. What is the average variable cost of producing three units of the good?

Output Total Fixed Cost Total Variable Cost Total Cost Average Fixed Cost Average Variable Cost Average Total Cost Marginal
Cost
1
2 $600
3 ????? $20
4 $440
5 $500
a. $20
b. $80
c. $420
d. $120
e.

$140

Refer to the accompanying graph to answer the following questions.

MC ATC AVC Q1 Q2 Q3 Q45 Q



The average total cost (ATC) and average variable cost (AVC) converge as the level of output produced increases because

a. average total cost decreases as output increases.
b. the firm is able to drive its competitors out of business by lowering its price.
c. average fixed cost decreases as output increases.
d. the firm experiences gains in productivity from employee specialization.
e. the firm is able to purchase more capital and exploit economies of scale.

In the short run, the cost of ________ is variable, whereas the cost of ________ is fixed.

a. electricity; wages
b. capital; raw materials
c. labor; capital
d. raw materials; labor
e. capital; labor
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