If average variable cost is falling, then marginal cost must also be falling.

Name: If average variable cost is falling, then marginal cost must also be falling.
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Question

Quizplus · Accepted Answer

Average variable cost (AVC) can be falling even if marginal cost (MC) is rising, as long as MC is below AVC. This is because the AVC is the average of all variable costs up to a certain quantity, and it will decrease as long as the additional (marginal) units cost less than the current AVC, even if the cost of additional units is increasing.

If Average Variable Cost Is Falling, Then Marginal Cost Must