Firm X's total fixed costs are $1,000. Its total variable costs of producing 100 units are $2,000, and its total variable costs of producing 200 units are $4,000. Which of the following will happen to firm X's average costs as it increases output from 100 to 200 units?
a. Average costs increase.
b. Average costs decrease.
c. Average costs remain constant.
d. Average costs increase slightly.
Ans: b. Average costs decrease.
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