Question

M i nyCLILION Perfect Competition Progress You are on question 4 of 12 Think about the short run average and marginal cost curves, which are shown as a function of the level of output being produced. Suppose a firm increases its output and finds that marginal cost is rising and average variable cost is falling. Then, it must be true that over that range of output: marginal cost is below average fixed cost marginal cost is above average variable cost average fixed cost is constant. marginal cost is below average variable cost Previous Next Activity Details ✓ You have viewed this topic Starts at 6. 2019 11:59 PM Ends How 3. 2019 11:59 PM 2019 AM

Answer 1

The correct answer is OPTION D i.e Marginal cost is below the average variable cost.

Explanation :-

When marginal cost curve is rising and variable cost curve is falling in this situation average variable cost is always above additional cost curve.

Average variable cost curve will keep on falling marginal cost curve purchase it at the lowest point of average variable cost after the intersection of average variable cost and marginal cost curve both average variable cost curve and marginal cost curve u start rising upward.
Simultaneously, the average variable cost and marginal cost of the organisation will start to rise.

Therefore, it is proved that marginal cost curve is below the average variable cost curve in the given situation.