A firm incurs a total cost of $500 per day for producing 10 semi-electronic toys.When its production increases to 15 toys,the total cost rises to $700.The firm observes that at each level of output between 10 toys and 15 toys,the marginal cost of production is below the average cost of production.Which of the following can be definitely concluded about the firm's cost curves when its output is anywhere between 10 toys and 15 toys?

Question

Quizplus · Accepted Answer

When the marginal cost of production is below the average cost of production, it means that producing an additional unit costs less than the average cost of producing all units so far. This situation leads to a decrease in the average cost as production increases, indicating that the average cost curve is negatively sloped for this range of output.

A Firm Incurs a Total Cost of $500 Per Day