If marginal costs fall below average cost,average cost must be
A)Be increasing
B)Be decreasing
C)Stay constant
D)None of the above

Question

If marginal costs fall below average cost,average cost must be
A)​Be increasing
B)Be decreasing
C)Stay constant
D)​None of the above

Quizplus · Accepted Answer

When marginal cost falls below average cost, it means that the additional unit produced is less costly than the average cost of all units produced so far. This implies that the average cost must be decreasing because the cost of production is becoming relatively cheaper with the addition of each unit.

If Marginal Costs Fall Below Average Cost,average Cost Must Be