Suppose the marginal cost curve in the short run first decreases and then increases. If marginal cost is decreasing, _____ must be _____ and _____ must be _____.
A) marginal product; increasing; average fixed cost; decreasing
B) average variable cost; decreasing; average fixed cost; increasing
C) average total cost; increasing; marginal cost; decreasing
D) marginal product; increasing; average variable cost; decreasing

Question

Quizplus · Accepted Answer

When marginal cost is decreasing, it implies that the marginal product of labor is increasing, as more output is produced with each additional unit of input. Additionally, average variable cost must be decreasing because the cost per unit of output is falling as efficiency improves.

Suppose the Marginal Cost Curve in the Short Run First