If Marginal Cost Is Less Than Average Variable Cost, Average

question 128

Multiple Choice

If marginal cost is less than average variable cost, average variable cost will:

• A) increase as output rises.
• B) decrease as output rises.
• C) remain constant as output rises.
• D) equal average total cost.

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Definitions:

New Share

A unit of equity representing ownership in a corporation that has been issued to investors for the first time, increasing the total number of outstanding shares.

Outstanding Shares

Shares of a corporation's stock that are currently owned by all shareholders, including share blocks held by institutional investors and restricted shares owned by the company’s officers and insiders.

Homemade Dividends

A concept whereby investors create their own dividend policy by selling a portion of the shares they own to generate cash, rather than relying on company-issued dividends.

Financial Engineering

The use of mathematical techniques and models to solve financial problems or to create financial products.