When marginal cost is below average variable cost, average variable cost must be:
A) at its minimum.
B) at its maximum.
C) falling.
D) rising.

Question

Quizplus · Accepted Answer

When marginal cost is below average variable cost, it means that the cost of producing an additional unit is less than the average variable cost of producing each unit. This implies that the average variable cost must be falling. This is because the addition of another unit at a lower marginal cost will bring down the overall average variable cost. Therefore, the best choice is C, falling.

When Marginal Cost Is Below Average Variable Cost, Average Variable