When average cost is falling marginal cost is ________ and when average cost is rising marginal cost is?
Correct answer: B. less than average cost, greater than average cost
- A. greater than average cost, greater than average cost
- B. less than average cost, greater than average cost
- C. less than average cost, less than average cost
- D. greater than average cost, less than average cost
Explanation
Marginal cost pulls the average cost downward when it is below average cost and pushes it upward when it is above average cost. Therefore, falling average cost means MC is less than AC, while rising average cost means MC is greater than AC.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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