When Marginal Cost Is Below Average Total Cost

question 106

Multiple Choice

When marginal cost is below average total cost:

• A) total cost is falling.
• B) total cost is rising.
• C) average total cost is falling.
• D) average fixed cost is rising.
• E) total variable cost is falling.

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Definitions:

Worst Case Scenario

the most adverse condition or outcome that can reasonably be projected.

Base Case

The default scenario in scenario analysis, used as a benchmark to compare the outcomes of alternative assumptions or actions.

NPV

Net Present Value, a calculation used to assess the profitability of an investment by summing the present values of all expected future cash flows minus the initial investment cost.

Break-even Points

The level of production or sales at which total revenues equal total expenses, resulting in no net profit or loss.