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Theory of Cost: Specialization in the Use of Variable Resrouces

According to the theory of cost, specialization in the use of variable resources in the short-run results initially in:

a) decreasing returns, and declining average and marginal costs
b) increasing returns, and declining average and marginal costs
c) increasing returns, and increasing average and marginal costs
d) decreasing returns, and increasing average and marginal costs
e) none of the above

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b) increasing returns, and declining average and marginal costs ...

Solution Summary

Theory of cost is briefly illustrated in this solution.

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