Average cost
A)is always larger than marginal cost.
B)declines for some range of output, hits a minimum, and then increases.
C)is always smaller than marginal cost.
D)is total cost/price of the product.

Question

Quizplus · Accepted Answer

The average cost initially declines as the fixed costs are spread over a larger number of units produced. However, as output increases beyond a certain point, the variable costs begin to increase, and the average cost increases as well. Marginal cost, on the other hand, is the cost of producing an additional unit and can be either greater than or less than the average cost depending on the stage of production. Therefore, option B is correct. Options A, C, and D are incorrect.

Average Cost