If Average Variable Cost Exceeds Marginal Cost, Then What Can

question 46

Multiple Choice

If average variable cost exceeds marginal cost, then what can we conclude about the average variable and average total costs?

• A) The average variable cost is decreasing, and the average total cost is increasing.
• B) Both the average variable and average total cost are decreasing.
• C) The average variable cost is decreasing, and the average total cost may be increasing or decreasing.
• D) The average variable cost is increasing, and the average total cost is decreasing.

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Definitions:

Maximum Profit

The highest possible financial gain that a company can achieve in a given period under existing conditions.

Natural Monopoly

A market condition in which a single supplier is more efficient in producing the product than any other potential producers due to high fixed or startup costs.

Electricity

A form of energy resulting from the existence of charged particles, used as a power source.

Profit-Maximizing Quantity

The production level where a firm reaches its maximum profit.