Asked by christopher Neville on May 03, 2024
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If a firm has to increase output suddenly to meet an increase in demand,its average total cost will decrease in the short run until it has time to add physical capital.
Physical Capital
Physical capital encompasses the machinery, equipment, and infrastructure a business uses to produce goods or services, distinct from financial capital or human skills.
Average Total Cost
The total cost of production divided by the number of goods produced, accounting for both fixed and variable costs.
Output
The total amount of goods or services produced by a firm, industry, or economy within a specific period.
- Understand the relationship between a firm's output level and its average total cost in both short run and long run.
Verified Answer
Learning Objectives
- Understand the relationship between a firm's output level and its average total cost in both short run and long run.
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