Whenever average cost is increasing, marginal cost must also be increasing.

Question

Quizplus · Accepted Answer

Whenever the average cost is increasing, it could be the case that the marginal cost is decreasing but still positive. For example, if a company produces a certain product and the production level is initially low, the marginal cost might be relatively high due to lower economies of scale. As production increases, the marginal cost might decrease due to increased efficiencies in production, even when the average cost is increasing.

Whenever Average Cost Is Increasing, Marginal Cost Must Also Be