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Show with the help of numerical example that average cost is constant when marginal cost is equal to it.

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Following table considers a situation when MC = AC over a range of output. It is a situation of constant returns to a factor.

Output Total Cost MC AC
1 10 10 10
2 20 10 10
3 30 10 10
4 40 10 10
5 50 10 10

The table shows that when constant returns to a factor prevail over a range of output (1-5 units of output), MC remains constant. Consequently, TC increases at a constant rate and MC and AC are found to be equal to each other. In the entire range of output when AC = MC, AC is also found to be constant (like MC).

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