Figure 7.2.1
-Refer to Figure 7.2.1 above. When 2 units of output are produced:
A) marginal cost is falling.
B) average total cost is falling.
C) average variable cost is less than average fixed cost.
D) marginal cost is less than average total cost.
E) all of the above

Question

Figure 7.2.1
-Refer to Figure 7.2.1 above. When 2 units of output are produced:
A) marginal cost is falling. 
B) average total cost is falling. 
C) average variable cost is less than average fixed cost. 
D) marginal cost is less than average total cost. 
E) all of the above

Quizplus · Accepted Answer

When 2 units of output are produced, all the given statements are true: marginal cost is falling because the cost of producing an additional unit is decreasing as output increases from 1 to 2 units; average total cost is falling as the cost per unit decreases with an increase in output; average variable cost is less than average fixed cost at this level of production; and marginal cost is less than average total cost, indicating that producing one more unit costs less than the average, thus pulling the average total cost down.

Figure 7.2.1 -Refer to Figure 7.2.1 Above. When 2 Units of Output