If average variable costs fall, marginal costs must be less than average variable costs.

Question

Quizplus · Accepted Answer

If the average variable costs are decreasing, it means that the additional cost of producing one more unit (marginal cost) is lower than the current average variable cost. This is because the current average variable cost includes the cost of producing all previous units, while the marginal cost only considers the cost of producing one additional unit.

If Average Variable Costs Fall, Marginal Costs Must Be Less