Whenever a firm's marginal costs are less than its average costs,
Its average costs must be:
A)falling.
B)rising.
C)constant.
D)falling, then rising.

Question

Quizplus · Accepted Answer

If a firm's marginal costs are less than its average costs, this means that the firm's average costs must be decreasing. This is because the marginal cost is the additional cost incurred by the firm if they produce one more unit of output. If the marginal cost is less than the average cost, this means that the firm's current average cost is higher than the cost of producing one more unit, which drives down the average cost. Therefore, the answer is A, falling.

Whenever a Firm's Marginal Costs Are Less Than Its Average