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Question
In the short run, average total costs and average variable costs converge as output increases because
a. marginal cost is below average total cost.
b. marginal cost is below average fixed cost.
c. average fixed costs continually increase.
d. average fixed costs continually decrease.
e. total cost continually increases.
Answer
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Suppose Solomon lives in a community with no price controls. What do you expect will happen if his town borders a community where there is a binding price ceiling on most products?
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