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| Q. |
If average cost falls, marginal cost - |
| A. | increases at a higher rate |
| B. | falls at the same rate |
| C. | increases at a lower rate |
| D. | falls at a higher rate |
| Answer» B. falls at the same rate | |
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Explanation: Average cost is the per unit cost incurred in the production of a good or service. It is specified as the total cost divided by the quantity of output. The marginal cost (the additional, cost of producing one more unit of output) and average cost are related. So when average total cost rises, marginal cost also rises; when average cost curve falls with the increase in output, the marginal cost also rises. |
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