You observe that at your current production of rutabaga, the average total cost of producing rutabaga is $1 and the marginal cost of producing rutabaga is $2. What should always happen if you increase rutabaga production?
A) Marginal cost will fall.
B) Average total cost will rise.
C) Average total cost will fall.
D) Both A and B are correct.

Question

Quizplus · Accepted Answer

When the marginal cost of producing an additional unit (in this case, $2) is higher than the current average total cost ($1), increasing production will raise the average total cost. This is because the new, higher marginal cost pulls the average cost up.

You Observe That at Your Current Production of Rutabaga, the Average