When marginal cost exceeds average total cost:

a. average fixed cost must be rising

b. average total cost must be rising

c. average total cost must be falling

d. marginal cost must be falling

Question

Jayden Herrera

Business

7 March, 19:14

When marginal cost exceeds average total cost:

a. average fixed cost must be rising

b. average total cost must be rising

c. average total cost must be falling

d. marginal cost must be falling

+4

Answers (1)

Know the Answer?

Lilyana Hickman · Answer 1

B) average total cost must be rising

Explanation:

Marginal cost is the rate at which total variable cost increases when one more unit is produces.

So when marginal cost is larger than average cost, it means that total average costs must be increasing.

For example, we have the following production costs:

total costs = $100 units produced = 20 units total average costs = $5 per unit

If the marginal cost of producing 1 more unit is $6, then the total costs will be $106 and the total average cost will be $5.05 per unit ( = $106 / 21 units).

When marginal cost exceeds average total cost:a. average fixed cost must be risingb. average total cost must be risingc. average total cost must be fallingd. marginal cost must be falling

When marginal cost exceeds average total cost:

a. average fixed cost must be rising

b. average total cost must be rising

c. average total cost must be falling

d. marginal cost must be falling