Whenever the Marginal Cost Curve Lies Above the Average Total

question 40

Multiple Choice

Whenever the marginal cost curve lies above the average total cost curve,

• A) average variable cost is decreasing.
• B) average total cost is decreasing.
• C) average fixed cost is increasing.
• D) average total cost is increasing.
• E) average fixed cost must be constant.

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Definitions:

Long Run

A period in which all factors of production and costs are variable, allowing for full adjustment to changes.

Variable Factors

Inputs to production that can be adjusted in the short term, such as labor and raw materials.

Fixed Costs

Expenses that do not change with the level of output, such as rent or salaries.

Average Total Cost

The total cost of production divided by the quantity of output produced, representing the per unit cost of production.