When Average Costs of Production Are Falling, Average Cost

question 2

Multiple Choice

When average costs of production are falling, average cost:

• A) is higher than marginal cost.
• B) is equal to price.
• C) is negative.
• D) is less than marginal cost.

---

Definitions:

Straight-Line Depreciation

An approach to spreading out the expense of a tangible resource evenly over its operational lifespan in annual increments.

Capital Budgeting

The process of planning and evaluating investments in long-term assets and projects, focusing on potential return on investment.

Straight-Line Depreciation

A method of allocating the cost of an asset evenly across its useful life.

Capital Budgeting

The procedure of appraising and opting for long-term investments consistent with the goal of increasing the wealth of shareholders.