Refer to Table 8.3. From the information in the given table,

A) the firm is in the long run.
B) the firm eventually experiences diminishing returns to its variable input.
C) the marginal cost curve intersects the average total cost curve between 3 and 4 units of output.
D) the difference between total cost and total variable cost decreases as output increases.

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Kevan Granado · Accepted Answer

Final Answer : B, Explanation :  The presence of diminishing returns to a variable input is indicated by the increasing average variable cost (AVC) from 3 to 4 units of output, which suggests that adding more of the variable input (e.g., labor) to a fixed input (e.g., machinery) beyond a certain point results in less additional output, hence diminishing returns. The other options cannot be directly inferred from the given table without additional information.

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