Total cost falls when marginal cost is ________,and total cost rises when marginal cost is ________.
A) zero; negative
B) zero; positive
C) positive; negative
D) negative; positive

Question

Quizplus · Accepted Answer

When marginal cost is negative, it means that the production is decreasing and the firm is producing beyond its optimal level thus increasing the cost. On the other hand, when marginal cost is positive, it means that production is increasing and the firm is producing up to its optimal level thus reducing the cost. Hence, when total cost falls, it means that marginal cost is reducing which happens when it is positive. And when total cost rises, it means that marginal cost is increasing which happens when it is negative.

Total Cost Falls When Marginal Cost Is ________,And Total Cost