For any given level of output:
A) marginal cost must be greater than average cost.
B) average variable cost must be greater than average fixed cost.
C) average fixed cost must be greater than average variable cost.
D) fixed cost must be greater than variable cost.
E) None of the above is necessarily correct.

Question

Quizplus · Accepted Answer

None of the statements A through D is necessarily correct for any given level of output. Marginal cost can be above or below average cost depending on the specific point on the cost curve. Average variable cost and average fixed cost can vary in their relationship to each other depending on the level of output and the specific cost structure of the firm. Similarly, fixed cost and variable cost do not have a necessary relationship that holds at all levels of output; their comparison depends on the production volume and cost structure of the business.

For Any Given Level of Output