If Marginal Cost Exceeds Average Variable Cost but Is Less

question 237

Multiple Choice

If marginal cost exceeds average variable cost but is less than average total cost, then as output increases average total cost ________ and average variable cost ________.

• A) increases; decreases
• B) decreases; decreases
• C) increases; increases
• D) decreases; increases

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Definitions:

Total Product Curve

A graphical representation showing how the total quantity of output of a good or service varies with the amount of a variable input used in production.

Variable Input

Variable Input refers to any input in the production process that varies with the level of output, such as labor, raw materials, and energy, in contrast to fixed inputs which remain constant regardless of the level of production.

Fixed Inputs

Resources or factors of production that cannot be easily increased or decreased in the short term, such as buildings or machinery.

Marginal Product

The additional output resulting from a one unit increase in a particular input, holding other inputs constant.