In the Short Run, If Average Total Cost Is Increasing

question 99

Multiple Choice

In the short run, if average total cost is increasing as output rises, then

• A) marginal cost must be below average total cost.
• B) average total cost is no longer equal to the sum of average variable cost and average fixed cost.
• C) average variable cost must be increasing.
• D) average fixed costs must be increasing.
• E) total fixed costs must be increasing.

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Definitions:

Inferior Good

A type of good for which demand decreases as the income of consumers increases.

Convex Preferences

A preference structure where a consumer prefers mixtures or averages of two goods or bundles to extreme amounts of one good or bundle.

Utility Function

A mathematical representation in economics that quantifies the satisfaction or happiness an individual gains from consuming various bundles of goods and services.

Income Effect

Shifts in income for individuals or within the economy and their consequences on the volume of goods or services demanded.