Which of the following statements about costs is correct?
A)When marginal cost is less than average total cost, average total cost is rising.
B)The total cost curve is U-shaped.
C)As the quantity of output increases, marginal cost eventually rises.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

Choice A is incorrect because when marginal cost is less than average total cost, average total cost is falling. Choice B is incorrect because the shape of the total cost curve depends on the shape of the variable cost curve. Choice C is correct because as the law of diminishing returns sets in, each additional unit of output requires more inputs and thus, the cost of producing that unit (marginal cost) increases.

Which of the Following Statements About Costs Is Correct