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Economics · Oct / Nov 2016 · Paper 13 · Question 15

2281Firms’ costs, revenue and objectives

A firm has fixed costs of $100 for its daily output. The table shows its daily total variable costs. output (units) | 1 | 2 | 3 | 4 total variable costs ($) | 200 | 360 | 500 | 720 What can be concluded about the firm's average total cost?

  1. AIt falls continuously.
  2. BIt is highest at output 4 units.
  3. CIt is lowest at output 3 units.
  4. DIt rises continuously.

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Correct answer: C. It is lowest at output 3 units.

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