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(A)Company experts have no idea what the distribution of the development cost is.All they can state is that "we are 90% sure it will be somewhere between $450,000 and $650,000."
(B)Company experts can still make the same two statements as in (A),but now they can also state that "we believe the distribution is symmetric and its most likely value is about $550,000."
(C)Company experts can still make the same two statements as in (A),but now they can also state that "we believe the distribution is skewed to the right,and its most likely value is about $500,000."
Fixed Cost
Costs that do not change with the level of production or sales, such as rent or salaries.
Marginal Costs
The cost incurred by producing one additional unit of a product or service.
Total Variable Cost
The sum of all costs that vary with the level of output in the short run.
Average Fixed Costs
The fixed costs of production (expenses that do not change with the level of output) divided by the quantity of output produced.
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