Which of the Following Statements Is True Regarding the Relationship

question 17

Multiple Choice

Which of the following statements is true regarding the relationship between average and marginal cost functions?

• A)When average cost is a decreasing function of output,marginal cost is greater than average cost.
• B)When average cost neither increases or decreases (because it is constant or at a minimum point),marginal cost is equal to average cost
• C)The average cost function is always smaller than the marginal cost function
• D)The average cost function is always greater than the marginal cost function
• E)When average cost is an increasing function of output,marginal cost is less than average cost

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Definitions:

Optimal Level

The best or most efficient point at which a particular action or operation achieves a balance between benefits and costs.

Profit-maximizing Output

The maximum profit attainment point for a company occurs when the marginal cost matches the marginal revenue, indicating the optimum production level.

Purely Competitive Firm

A firm operating in a market where there are many sellers and buyers, the products are homogenous, and there are no barriers to entry or exit, leading to market prices being determined by supply and demand.