If a firm's marginal cost is smaller than its average total cost, its average total cost is

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Quizplus · Accepted Answer

When marginal cost is smaller than average total cost, it implies that the average total cost curve is decreasing. This is because when the marginal cost is lower than the average total cost, producing one more unit of output will lower the average total cost, bringing it down towards the marginal cost. If the marginal cost is constantly lower than the average total cost, the average total cost curve will continue to decrease.

If a Firm's Marginal Cost Is Smaller Than Its Average