Which of the following statements regarding the relationship between average and marginal costs is INCORRECT?
A) There is always a definite relationship between average and marginal cost.
B) When marginal costs are less than average costs, the latter must fall.
C) When marginal costs are greater than average costs, the latter must rise.
D) There is no way for average variable costs to fall when marginal costs are falling.

Question

Quizplus · Accepted Answer

This statement is incorrect because it is possible for average variable costs to fall even when marginal costs are falling. This could happen if the fixed costs of production are relatively high, causing average costs to remain high even as marginal costs decrease.

Which of the Following Statements Regarding the Relationship Between Average