Asked by Alyssa Abrahamson on Sep 23, 2024
Verified
Average costs
A) fall at all levels of output
B) are falling when marginal costs are below average costs and rising when marginal costs are above average costs
C) are falling when marginal costs are above average costs and rising when marginal costs are below average costs
D) does not vary with output
Marginal Costs
The additional cost incurred to produce an extra unit of a product or service.
Average Costs
The total costs of production divided by the number of units produced, representing the cost per unit.
- Comprehend the relationship between output levels and average/marginal costs.
Verified Answer
SP
Sarah Padilla2 days ago
Final Answer :
B
Explanation :
When marginal costs are below average costs, it means that producing one more unit is cheaper than the average cost of all units produced so far, leading to a decrease in average costs. Conversely, when marginal costs are above average costs, it means that producing one more unit is more expensive than the average cost of all units produced so far, leading to an increase in average costs. Therefore, average costs are falling when marginal costs are below average costs and rising when marginal costs are above average costs.
Learning Objectives
- Comprehend the relationship between output levels and average/marginal costs.