Economics

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2. Advertising can inform buyers, but sellers must incur costs to advertise. If so, advertising can result in higher prices to consumers. Does this mean advertising is economically inefficient? If not, explain how it can simultaneously create value and increase market prices.

  • Economics -

    Marginal Cost (MC): $5 per unit
    Fixed Cost (FC): $20
    Total Cost (TC): $25
    Average Variable Cost (AVC): $5
    FC is always going to be constant at $20; however, VC is the change in cost as an increase in cost of product to produce more.

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