A rising marginal cost curve below the average variable cost curve means
A) average variable costs are falling.
B) average fixed costs are rising.
C) average total costs are rising.
D) total variable cost is falling.
E) total fixed cost is rising.

Question

Quizplus · Accepted Answer

A rising marginal cost curve indicates that it is becoming more expensive to produce each additional unit, which could be due to a variety of factors such as diminishing returns to labor or increasing costs of inputs. However, if the marginal cost curve is still below the average variable cost curve, it means that the average variable cost of producing each unit is actually decreasing. This is because the fixed costs of production are being spread out over a larger number of units, which helps to lower the average variable cost. Therefore, the correct answer is A) average variable costs are falling.

A Rising Marginal Cost Curve Below the Average Variable Cost