At outputs less than the minimum of average variable cost:
A)marginal cost is greater than average variable cost.
B)marginal cost is less than average variable cost.
C)marginal cost is equal to average variable cost.
D)marginal cost is parallel to average variable cost.

Question

Quizplus · Accepted Answer

If the output is less than the minimum of average variable cost, it means that the firm is not producing enough to cover its variable costs. In this case, the marginal cost will be less than the average variable cost because the additional cost of producing one more unit will be lower than the average variable cost. Therefore, the best choice is B.

At Outputs Less Than the Minimum of Average Variable Cost