Question

If marginal cost exceeds average variable cost but is less than average total cost, then as output increases average total cost ________ and average variable cost ________.

Answer 1

If marginal cost exceeds average variable cost but is less than average total cost, then as output increases average total cost

• Decrease and;

The Average Variable Cost:

• Increase

What is Marginal Cost?

This refers to the total production cost change which is associated with the production of one unit of utility.

With this in mind, we can see that if the marginal cost exceeds average variable cost but is less than average total cost, then as output increases average total cost would decrease and the average variable cost would increase.

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