If the marginal cost of the 10th unit of output is $15 and the average total cost of the 10th unit of output is $15: a

Accounting Dec 07, 2020

If the marginal cost of the 10th unit of output is $15 and the average total cost of the 10th unit of output is $15:

a. Average total cost is decreasing at 10 units of output,

b. Average total cost is maximized at 10 units of output,

c. Average total cost is minimized at 10 units of output,

d. Average total cost is increasing at 10 units of output.

Expert Solution

Option c. Average total cost is minimized at 10 units of output is correct.

The reason behind the correct option is that at the 10th unit the marginal and average costs are $15. As per the relationship between the two, at such a point average cost is the lowest and after that, from the next unit onwards it starts rising.

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