Suppose that when output is 20, marginal cost is $20, and average total cost is $30. Then which of the following is most likely to be true?
A) Average total cost is declining.
B) Average total cost is constant.
C) Average total cost is rising.
D) Average total cost is less than average fixed cost.

Question

Quizplus · Accepted Answer

When marginal cost is below average total cost, average total cost is declining. This is because the additional unit of output costs less than the average cost of all units produced up to that point, pulling the average cost down.

Suppose That When Output Is 20, Marginal Cost Is $20