The derivative,dAC(Q)/dQ = (1/Q₂){Q(dC/dQ)− C(Q)},illustrates that when:

Question

Quizplus · Accepted Answer

The derivative states that the relationship between changes in quantity produced (Q) and changes in average cost (AC) is determined by two factors: the marginal cost (MC) and the level of output (Q). When the marginal cost (MC) is less than the average cost (AC), the derivative is negative, indicating that average costs decrease as output increases (i.e., economies of scale). Thus, option B is correct.Option A is incorrect because the derivative indicates that average costs increase as output increases when MC(Q) > AC(Q). Option C is incorrect because the derivative indicates that average costs increase as output increases when MC(Q) < AC(Q).Option D is incorrect because one of the options is correct (option B).

The Derivative,dAC(Q)/dQ = (1/Q2){Q(dC/dQ)− C(Q)},illustrates That When

The Derivative,dAC(Q)/dQ = (1/Q₂){Q(dC/dQ)− C(Q)},illustrates That When