Suppose the marginal cost curve in the short run first decreases, then reaches a minimum, and then increases.If we are at an output where marginal cost is decreasing, then:
A)marginal product must be increasing.
B)average variable cost must be decreasing.
C)average total cost must be increasing.
D)marginal product must be increasing and average variable cost must be decreasing.

Question

Quizplus · Accepted Answer

Marginal cost is the change in total cost divided by the change in output. If marginal cost is decreasing, then the change in total cost is less than the change in output. This means that the average cost of producing each unit of output is decreasing. Average variable cost is the total variable cost divided by the output. If average variable cost is decreasing, then the total variable cost is less than the change in output. This means that the marginal cost must be decreasing.

Suppose the Marginal Cost Curve in the Short Run First