Which of the following most accurately describes what must be occurring if the short-run average total cost is increasing?
A) Total fixed cost must be increasing.
B) Average variable cost must be decreasing.
C) Marginal cost must be greater than average total cost.
D) Average fixed cost must be greater than the marginal cost.

Question

Quizplus · Accepted Answer

When short-run average total cost is increasing, it indicates that the marginal cost of production is higher than the average total cost. This means that the cost of producing an additional unit of output is increasing, which pulls up the average cost of all units produced. Option A is incorrect because the total fixed cost does not affect short-run average total cost, only the average fixed cost. Option B is incorrect because if average variable cost is decreasing, it would help to reduce short-run average total cost. Option D is incorrect because average fixed cost does not affect short-run average total cost, only the average variable cost and marginal cost.

Which of the Following Most Accurately Describes What Must Be