If the 15th unit of output has a marginal cost of $29.50 and the average cost of producing 14 units of output is $30.23, what will happen to the average cost of production if the 15th unit is produced?
A)Average cost increases as more is produced.
B)Average cost will fall.
C)Average cost could increase or decrease depending on what happens to variable cost.
D)Average cost could increase or decrease depending on what happens to fixed cost.

Question

Quizplus · Accepted Answer

If the marginal cost of producing the 15th unit is less than the average cost of producing 14 units, then producing the 15th unit will bring the average cost down. In this case, since the marginal cost of producing the 15th unit is $29.50, which is less than the average cost of producing 14 units ($30.23), the average cost will fall if the 15th unit is produced. Therefore, option B is the correct answer.

If the 15th Unit of Output Has a Marginal Cost