Refer to Greene Enterprises, Inc $$A V C = 88 - 0.026 Q + 0.000003 Q ^ { 2 }$$

question 35

Multiple Choice

Refer to Greene Enterprises, Inc., whose manager recently estimated its average variable cost (AVC) function to be

$$A V C = 88 - 0.026 Q + 0.000003 Q ^ { 2 }$$
Greene Enterprises faces total fixed costs (TFC) of $300,000.
-When Greene's output is 2,000 units, average variable cost (AVC) is

• A) rising
• B) falling
• C) greater than short-run marginal cost
• D) less than short-run marginal cost
• E) both b and c

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Definitions:

Economies of Scale

Reductions in the average cost of a product due to increased production levels.

Diseconomies of Scale

An increase in production costs as the scale of production goes up, leading to reduced efficiency.

Fixed Inputs

Resources or factors of production, such as land or capital, that remain constant regardless of the level of output or production.

Variable Inputs

Resources or inputs whose quantity can be changed in the short term to adjust the level of production.