When the Marginal Cost Curve Lies Below the Average Cost

question 108

Multiple Choice

When the marginal cost curve lies below the average cost curve,________.

• A) the marginal cost curve is vertical
• B) the marginal cost curve is horizontal
• C) the average cost curve slopes downward
• D) the average cost curve slopes upward

---

Definitions:

Contribution

The amount of money or resources that an individual or entity provides towards a particular project, investment, or cause.

Operating Leverage

A measure of how revenue growth translates into growth in operating income, indicating the proportion of fixed to variable costs.

Fixed Costs

Costs that do not fluctuate with changes in production level or sales volume, such as rent, salaries, and insurance.

EBIT

Earnings Before Interest and Taxes, also known as EBIT, is a way to evaluate a company's profit without considering tax and interest expenses.