Question

When the marginal cost falls, the average cost also falls, but ____________.

• A. the marginal cost falls more rapidly than the average cost
• B. the marginal cost rises more rapidly than the average cost
• C. the average cost rises more rapidly than the marginal cost
• D. the average cost falls more rapidly than the marginal cost

Answer 1

Answer: (A)

the marginal cost falls more rapidly than the average cost

When the marginal cost is lesser than the average cost, the average cost falls. When an additional unit of output is produced the marginal cost falls and hence average cost also falls. The marginal cost falls rapidly, as it is affected by the smallest addition to the output.