Whenever a firm's marginal costs are less than its average costs, its average costs must be:
A) falling.
B) rising.
C) constant.
D) falling, then rising.

Question

Quizplus · Accepted Answer

When a firm's marginal costs are less than its average costs, it means that each additional unit of production is costing less than the average cost of all units produced so far. This will bring the overall average cost down, causing it to fall.

Whenever a Firm's Marginal Costs Are Less Than Its Average