If the average cost of producing a good is increasing as a firm produces more of the good,then which of the following must be TRUE?
A) AFC is falling.
B) AVC is rising.
C) MC AVC.
D) All of the above.

Question

If the average cost of producing a good is increasing as a firm produces more of the good,then which of the following must be TRUE?
A) AFC is falling.
B) AVC is rising.
C) MC > AVC.
D) All of the above.

Quizplus · Accepted Answer

When the average cost (AC) of producing a good is increasing, it implies that the marginal cost (MC) of producing an additional unit is higher than the current average cost, which causes the average cost curve to rise. This situation encompasses all the given options: AFC (Average Fixed Cost) falls as output increases because fixed costs are spread over a larger number of goods, AVC (Average Variable Cost) is rising because the average cost of producing each unit increases, and MC must be greater than AVC for the average cost to increase.

If the Average Cost of Producing a Good Is Increasing