If marginal cost is below average variable cost,
A)average total cost is increasing but average variable cost is decreasing.
B)both average total cost and average variable cost are decreasing.
C)both average total cost and average variable cost are increasing.
D)average variable cost is less than average fixed cost.

Question

Quizplus · Accepted Answer

When marginal cost is below average variable cost, it pulls the average variable cost down, causing it to decrease. Similarly, it also pulls down the average total cost if it is below it, leading to a decrease in both.

If Marginal Cost Is Below Average Variable Cost