Average costs
A)fall at all levels of output
B)are falling when marginal costs are below average costs and rising when marginal costs are above average costs
C)are falling when marginal costs are above average costs and rising when marginal costs are below average costs
D)does not vary with output

Question

​Average costs
A)​fall at all levels of output
B)are falling when marginal costs are below average costs and rising when marginal costs are above average costs
C)are falling when marginal costs are above average costs and rising when marginal costs are below average costs
D)​does not vary with output

Quizplus · Accepted Answer

When marginal costs are below average costs, it means that producing one more unit is cheaper than the average cost of all units produced so far, leading to a decrease in average costs. Conversely, when marginal costs are above average costs, it means that producing one more unit is more expensive than the average cost of all units produced so far, leading to an increase in average costs. Therefore, average costs are falling when marginal costs are below average costs and rising when marginal costs are above average costs.

​Average Costs

Average Costs