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Question
A firm is currently producing an output at which price equals the minimum point on the average variable cost curve. If wage rates increase, the firm will
A) increase its rate of output to make up for the higher variable costs.
B) shut down since it would no longer be covering its variable costs.
C) decrease its rate of output to offset the higher variable costs.
D) not make any changes since its current rate of output is still minimizing its losses.
Answer
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