When Marginal Cost Is Less Than Average Total Cost

question 94

Multiple Choice

When marginal cost is less than average total cost,

• A)marginal cost must be falling.
• B)average variable cost must be falling.
• C)average total cost is falling.
• D)average total cost is rising.

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Definitions:

Volume-Based Costs

Costs that vary directly with the level of production or sales volume, such as direct materials and direct labor, contrasting with fixed costs that remain constant regardless of volume.

Qualitative Characteristics

The attributes that make financial information useful to users, including relevance and faithful representation.

Quantitative Characteristics

Measurable attributes that can be quantified and analyzed numerically, often used in statistical and financial analysis.

Decision-making Process

The systematic approach of identifying and evaluating choices to come to a conclusion or course of action.