When marginal cost curve is below an average cost curve, average cost is A

Accounting Dec 09, 2020

When marginal cost curve is below an average cost curve, average cost is

A. increasing with output.

B. declining with output.

C. not varying with output.

D. none of the statements associated with this question are correct.

Expert Solution

Option B

B. declining with output.

A marginal cost is the cost of an extra unit of output produced. An average cost is a total cost divided by quantity equals per unit cost. A per unit old cost and cost of one unit of extra output are compared here. If the cost of one unit of extra output is decreasing, then the per unit cost also decreases because the per unit cost adds this cost as well and make an average.

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