A Firm with Fixed Costs Produces at the Lowest Point

question 10

Multiple Choice

A firm with fixed costs produces at the lowest point on its U-shaped average variable cost curve. If it raises output by 1 unit, then

• A)average fixed cost will increase.
• B)average total cost will decrease.
• C)average fixed cost will necessarily be below average variable cost.
• D)average total cost will be less than average variable cost.

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Definitions:

Bank Service Charges

Fees charged by banks for account maintenance, transactions, and other financial services.