A firm's average costs will be falling whenever its:
A)marginal costs are positive.
B)marginal costs are negative.
C)marginal costs are less than average costs.
D)marginal costs are less than fixed costs.

Question

Quizplus · Accepted Answer

When a firm's marginal costs are less than its average costs, it means that the firm is experiencing economies of scale. This is because producing more units is leading to a decrease in average costs, making the firm more efficient. Therefore, option C is the correct answer. Options A and B are incorrect because positive and negative marginal costs do not provide any information about the firm's average costs. Option D is incorrect because marginal costs being less than fixed costs does not necessarily ensure that average costs are falling.

A Firm's Average Costs Will Be Falling Whenever Its