If the average variable cost curve is falling,
A)the MC curve must be below it.
B)marginal cost is greater than average variable cost.
C)the MC curve is necessarily falling.
D)the MC curve is necessarily horizontal (neither rising nor falling).
E)the MC curve is necessarily rising.

Question

Quizplus · Accepted Answer

When the average variable cost (AVC) curve is falling, it means that the marginal cost (MC) of producing an additional unit is less than the current average variable cost, which pulls the average down. This is why the MC curve must be below the AVC curve for the AVC to be falling.

If the Average Variable Cost Curve Is Falling