If Franco's Pizza Parlor knows that the marginal cost of the 500ᵗʰ pizza is $3.50 and that the average total cost of making 499 pizzas is $3.30,then
A) average total costs are rising at Q = 500.
B) average total costs are falling at Q = 500.
C) total costs are falling at Q = 500.
D) average variable costs must be falling.

Question

Quizplus · Accepted Answer

Marginal cost is the cost of producing one additional unit, while average total cost is the cost per unit when all units are produced. If the marginal cost of the 500ᵗʰ pizza is $3.50, and the average total cost of producing 499 pizzas is $3.30, this means that the cost of producing the 500th pizza is higher than the average cost of producing the previous 499 pizzas. This indicates that average total costs are rising at Q = 500.

If Franco's Pizza Parlor Knows That the Marginal Cost of the 500ᵗʰ