If marginal cost is below average total cost, then average total cost
A)is constant.
B)is falling.
C)is rising.
D)may rise or fall depending on the size of fixed costs.

Question

Quizplus · Accepted Answer

If marginal cost is below average total cost, it brings down the average total cost, hence it is falling. This is because marginal cost represents the change in total cost resulting from producing an additional unit, whereas average total cost represents the total cost per unit. When marginal cost is less than average total cost, it shows that the cost of production of an additional unit is less than the average, bringing down the overall average cost.

If Marginal Cost Is Below Average Total Cost, Then Average