A firm's original average cost curve is represented by AC₁. After a major investment in new technology, which increases fixed costs but lowers per-unit costs at high volumes, its new average cost curve is AC₂. A graph of these two curves would show that for low levels of output, AC₂ is above AC₁, while for high levels of output, AC₂ is below AC₁. Let Q* be the quantity of output where the two curves intersect. Under which condition would this investment lead to a higher average cost of production compared to the original setup?
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