If the marginal cost curve is below the average variable cost curve, then
A) average variable costs are increasing.
B) average variable costs are decreasing.
C) marginal cost must be decreasing.
D) average variable costs could either be increasing or decreasing.

Question

Quizplus · Accepted Answer

When the marginal cost curve is below the average variable cost curve, it means that the cost of producing one more unit is less than the average of all units produced so far. This situation leads to a decrease in the average variable costs because the addition of a lower-cost unit pulls the average down.

If the Marginal Cost Curve Is Below the Average Variable