When the Marginal Cost Curve Lies Above the Average Cost

question 140

Multiple Choice

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

• A) the marginal cost curve slopes upward, while the average cost curve slopes downward
• B) the marginal cost curve slopes downward, while the average cost curve slopes upward
• C) both the marginal cost curve and the average cost curve slope upward
• D) both the marginal cost curve and the average cost curve slope downward

---

Definitions:

Economic Life

The estimated period over which an asset is expected to be economically usable by one or more users, with profitability considered.

Residual Value

The estimated value that an asset will realize upon the end of its useful life, often used in calculating depreciation.

Straight-Line Method

A depreciation method that allocates the cost of an asset evenly over its useful life.

FASB

The Financial Accounting Standards Board, an independent organization responsible for establishing accounting and financial reporting standards in the US.