Question

When average cost increases, marginal cost is ____________.

• A. equal to average variable cost
• B. above average cost
• C. below average cost
• D. equal to average cost

Answer 1

Answer: (B)

above average cost

The marginal cost is the value of the additional cost that is added to the average thus if the marginal cost is higher than the average it tends to drag up the value of the average cost. Thus when the MC line is above the AC line, average cost is increasing.