Question

Which of the following statements is correct? Average total cost is the difference between average variable cost and average fixed cost. . When marginal product rises, marginal cost must also rise. . Marginal cost measures the cost per unit of output associated with any level of production. Marginal cost is the price or cost of an extra variable input (for example, an additional worker or machine) divided by its marginal product.

Answer 1

Answer:

The correct answer is: Marginal cost is the price or cost of an extra variable input (for example, an additional worker or machine) divided by its marginal product.

Explanation:

The average total cost is not the difference but the sum of the average variable cost and average fixed cost. The average cost shows the cost per unit of output associated with any level of production.

The marginal product is the increase in output due to each additional unit of input employed. The marginal cost is the increase in the total cost due to each additional unit of input employed. As the marginal product increases the marginal cost declines.