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

Question

Quizplus · Accepted Answer

When the average variable cost (AVC) curve is above the marginal cost (MC) curve, it means that the marginal cost is below the average, pulling the average down. This situation does not specify whether the marginal costs are increasing or decreasing; they could be doing either as long as they are below the average variable costs.

If the Average Variable Cost Curve Is Above the Marginal