Use the same data presented in Problem 1 to answer the following questions:
a. Explain the impact on the optimal price of designating the "miscellaneous" cost item as fixed versus variable.
b. Under what circumstances do you think the average variable cost would increase (as is generally expected in the economic analysis of cost)? Do von think the law of diminishing returns would play a role in increasing AVC? Explain.
c. Under what circumstances do you think the average variable cost would decrease? Explain.