If marginal cost is greater than average total cost, then:
A) average total cost is increasing.
B) average total cost is decreasing.
C) average total cost is unchanged.
D) marginal cost is decreasing.

Question

Quizplus · Accepted Answer

When marginal cost is greater than average total cost, it means that the cost of producing an additional unit is greater than the average cost of all units produced. This indicates that the average total cost is increasing as the firm is experiencing diminishing returns to scale.

If Marginal Cost Is Greater Than Average Total Cost, Then