Question

When the marginal cost rises, the average cost also rises, 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 marginal cost rises more rapidly than the total cost
• D. none of these

Answer 1

The correct option is B the marginal cost rises more rapidly than the average cost

When the marginal cost is above the average cost, average cost increases. On the other hand, if the marginal cost is lower than the average cost then average cost also decreases. The reason for rapid rise in marginal cost is the law of diminishing returns.