Answer to the question no. 1:
Option c: The difference between Average Total Cost and Average Variable cost is Average fixed cost.
Explanation: We know that in the short run TC=TFC+TVC. So, ATC=AFC+AVC. There always exist a gap between the ATC and the AVC because AFC can never be zero and the gap between the ATC and the AVC shows the AFC. Since, the AFC can not be zero, the gap between the ATC and the AVC always remain but shrink with the increasing output level.
Answer to the question no. 2:
Option a: w/r.
Explanation: We can represent it as the ratio of the PL and PK, where the PL is the price of labour (wage) and the PK is the price of capital (rent). In the producers equilibrium, the MPL/MPK=PL/PK/=w/r.
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