Which of the following are rules about the relation between average cost and marginal cost:
A)When marginal cost is below average cost, it is pulling average cost down.
B)When MC is above AC, it is pulling up AC.
C)When MC just equals AC, AC is constant.
D)All of the above.
E)None of the above.

Question

Quizplus · Accepted Answer

All of the statements are true. When marginal cost is below average cost, it means the additional unit is cheaper to produce than the average cost of all units produced so far, which pulls the average cost down. When marginal cost is above average cost, it means the additional unit is more expensive to produce than the average cost, so it pushes the average cost up. When marginal cost equals average cost, it means the average cost is constant as the cost of producing the additional unit is equal to the average cost of all units produced so far.

Which of the Following Are Rules About the Relation Between