When marginal cost is below average total cost, the average total cost of production is generally:
Correct answer: B. Falling
- A. Rising
- B. Falling
- C. Constant at zero
- D. Equal to marginal revenue
Explanation
A marginal value below an average pulls the average downward, so average total cost falls. Average total cost rises when marginal cost is above it and is at its minimum when the two are equal.
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