The Following Graph Shows Average Fixed Costs, Average Variable Costs

question 124

Multiple Choice

The following graph shows average fixed costs, average variable costs, average total costs, and marginal costs of production. Why does the distance between curves II and III get smaller as quantity increases?

• A) Marginal cost is increasing.
• B) Average variable cost is increasing.
• C) Average fixed cost is declining.
• D) Average fixed cost is increasing.

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Definitions:

Modified Version

A version that has been altered or adjusted from its original form.

Socialist Economy

An economic system where the means of production, distribution, and exchange are owned or regulated by the community as a whole.

Market Failure

A situation in which the allocation of goods and services by a free market is not efficient, often leading to a net social welfare loss.

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Refers to the optimal distribution of resources and goods in a way that maximizes the welfare or utility of consumers.