When marginal cost is below average total cost:

Question

Quizplus · Accepted Answer

When marginal cost is below average total cost, it means that the average total cost is decreasing. This is because the marginal cost is the additional cost of producing one more unit, while the average total cost is the total cost divided by the quantity produced. When the marginal cost is below the average total cost, it means that producing one more unit is adding less to the total cost than the average cost per unit, thus bringing down the average cost.

When Marginal Cost Is Below Average Total Cost