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At low levels of employment and output, as the firm hires more labor, marginal product and average product rise, and marginal cost and average variable cost fall.

In that case, the society will be able to have more consumer goods and more capital goods.

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SO, do you raise or lower taxes. If she agrees, that would be great. The height of each step represents marginal product. Point out that, in this graph, units of capital goods are on the Y axis and units of consumer goods are on the X axis.

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