If Average Cost Is Decreasing

question 97

Multiple Choice

If average cost is decreasing,

• A) marginal cost equals average cost.
• B) marginal cost exceeds average cost.
• C) marginal cost is less than average cost.
• D) Not enough information is given.

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Definitions:

Contractionary Fiscal Policy

Economic measures employed by a government to reduce its expenditures or increase taxes with the aim of slowing down an overheated economy.

Potential Output

The highest level of real gross domestic product (GDP) that can be sustained over the long term without increasing inflation, reflecting the maximum productive capacity of an economy.

Short-Run Aggregate Supply

The total production of goods and services in an economy at different price levels in the short-term, considering wages and resource prices as sticky.

Short-Run Aggregate Supply

The total production of goods and services in an economy at different price levels over a short period, during which some production costs are fixed.