If marginal cost is above the average variable cost, then average variable cost is decreasing.

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Quizplus · Accepted Answer

If marginal cost is above the average variable cost, then the average variable cost is increasing, not decreasing. This is because the marginal cost reflects the additional cost of producing one more unit, which is likely to be higher than the average variable cost when a firm is experiencing diminishing returns to its inputs. As a result, the additional cost per unit will cause the average variable cost to increase, rather than decrease.

If Marginal Cost Is Above the Average Variable Cost, Then