Whenever average variable cost is declining with increases in output:
A) marginal cost is always declining as average total cost declines.
B) average total cost at first decreases and then increases with output.
C) marginal cost is always declining as average total cost increases.
D) marginal cost at first decreases and then increases with output.
E) marginal cost at first increases and then decreases with output.

Question

Quizplus · Accepted Answer

Whenever average variable cost is declining with increases in output, it means that each additional unit of output is being produced at a lower cost than the previous unit. This suggests that marginal cost is initially decreasing, which is reflected in the declining average variable cost. However, as output continues to increase, marginal cost will eventually increase, which is reflected in the increasing average total cost. Therefore, the correct answer is D - marginal cost at first decreases and then increases with output.

Whenever Average Variable Cost Is Declining with Increases in Output