If the marginal cost curve is below the average variable cost curve, then
A)average variable cost is increasing.
B)average variable cost is decreasing.
C)marginal cost must be decreasing.
D)average variable cost could either be increasing or decreasing.

Question

Quizplus · Accepted Answer

If the marginal cost curve is below the average variable cost curve, it means that each additional unit produced will cost less than the previous one. This will cause the average variable cost to decrease, as the fixed costs are spread over more units. Therefore, the best choice is B, average variable cost is decreasing.

If the Marginal Cost Curve Is Below the Average Variable