Engineers for The Giffen Record Company have determined that a 35% increase in all compact disc inputs will cause a 45% increase in output. Assuming that input prices remain constant, you correctly deduce that such a change will cause ________ as output increases.
A) average costs to increase
B) average costs to decrease
C) average costs to remain constant
D) marginal costs to increase

Question

Quizplus · Accepted Answer

If a 35% increase in inputs leads to a 45% increase in output, it means that output is increasing at a faster rate than inputs. This implies that the average cost of producing each unit of output is decreasing, as you are getting more output per unit of input.

Engineers for the Giffen Record Company Have Determined That a 35