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Economics and the 2008 crisis: a Keynesian view
Economics and the 2008 crisis: a Keynesian view

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Short run cost curves (4)

Activity 23c

a. 

Increase


b. 

Decrease


c. 

Remain unchanged


The correct answer is b.

Answer

If output increases from a quantity of 3000 per day, average cost will fall. This is because at this output the average cost curve is sloping downwards.

Increasing output will reduce the average cost until it reaches a minimum at a quantity of approximately 5000 per day. Then the average cost curve slopes upwards, so average cost increases when output increases beyond 5000 per day.