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Explain why according to economic theory

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a) With the aid of a diagram, explain why according to economic theory, in the short run rational firms should only be operating at Stage two of production.

b. Why is it not rational for firms to operate at Stage one or Stage three of production? marks)

c. The impact of COVID-19 has the CEO of a small manufacturing firm worried because of the reduced demand for its product has resulted in reduced production. She has asked you to explain how this will affect the firms fixed, variable, average and marginal costs.

Reference no: EM132502789

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