When marginal cost is rising:
A)average variable cost must be rising.
B)average total cost must be rising.
C)average variable cost and average total cost must be falling.
D)both average variable cost and average total cost may be rising or falling.

Question

Quizplus · Accepted Answer

When marginal cost is rising, it means the cost of producing one more unit of a good is increasing. However, this does not necessarily dictate the behavior of average variable cost (AVC) and average total cost (ATC). Both AVC and ATC could be increasing if the marginal cost is above them, or they could be decreasing if the marginal cost is still below them but rising. The direction of change for AVC and ATC depends on their relationship to the marginal cost at that point, not solely on the fact that marginal cost is increasing.

When Marginal Cost Is Rising