# If average variable cost exceeds marginal cost, then: a) both the average variable and average...

## Question:

If average variable cost exceeds marginal cost, then:

a) both the average variable and average total cost are decreasing.

b) the average variable cost is decreasing and the average total cost is increasing.

c) average variable cost is increasing and the average total cost is decreasing.

d the average variable cost is decreasing and the average total cost may be increasing or decreasing.

## Types of Production Costs:

Average Total Cost (ATC) is the cost per unit of the commodity. It is given by the total of all production costs divided by the number of units produced. The Average Variable Cost (AVC) is the variable cost per unit. It is given by variable cost divided by output. The Marginal Cost (MC) is the cost of producing an additional unit of the commodity. It is given by a change in the total cost divided by a change in output.

## Answer and Explanation: 1

Become a Study.com member to unlock this answer! Create your account

View this answerAnswer: **a) Both the average variable cost and average total cost are decreasing**

Reason:

When the marginal cost (MC) decreases, the average...

See full answer below.

#### Ask a question

Our experts can answer your tough homework and study questions.

Ask a question Ask a question#### Search Answers

#### Learn more about this topic:

from

Chapter 4 / Lesson 10Learn about product and cost curves. Explore examples of product and cost curve graphs, their purpose, and understand total product curves and total cost curves.

#### Related to this Question

- 14. Average variable cost may be either increasing or decreasing when a) marginal cost is decreasing b) marginal product is increasing c) average fixed cost is decreasing d) average total cost is inc
- If marginal cost is between average variable cost and average total cost, then: a. both average variable cost and average total cost are increasing. b. both average variable cost and average total cost are decreasing. c. average variable cost is increasin
- If marginal cost is below average variable cost: A. both the average total cost and average variable cost are decreasing. B. average total cost is increasing but the average variable cost is decreasing. C. both the average total cost and average variab
- If average variable costs are increasing while average total costs are decreasing, then A) marginal cost must lie between average variable and average total costs. B) marginal cost must equal averag
- If average variable costs are increasing while average total costs are decreasing, then A) marginal cost must lie between average variable and average total costs. B) marginal cost must equal average variable cost. C) marginal cost must equal average tota
- If average variable costs are increasing while average total costs are decreasing, then A) marginal cost must lie between average variable and average total costs. B) marginal cost must equal average variable cost. C) marginal cost must equal the avera
- If marginal cost is greater than average variable cost, a. average variable cost is decreasing. b. average variable cost is increasing. c. marginal cost is less than average variable cost. d. average variable cost is negative.
- If marginal cost is above average variable cost, then: a) Average variable cost is increasing, b) Marginal cost must be decreasing, c) Average variable cost is constant, d) Average variable cost is decreasing, e) There are fixed costs.
- Marginal cost is average variable cost when. a. equal to; average total cost is minimized b. less than; total cost is maximized c. greater than; average fixed cost is minimized d. equal to; average variable cost is minimized
- At the level of output where marginal cost equals average variable cost: a. average total cost is minimum b. average variable cost is decreasing c. average variable cost is increasing d. average total cost is decreasing
- When marginal cost is greater than average total cost, A. average total cost must be increasing with output. B. average variable cost must be decreasing with output. C. average fixed cost must be increasing with output. D. marginal cost must be increas
- Marginal cost is equal to both average variable cost and average total cost when: a. average total cost and average variable cost are decreasing. b. average variable cost and average total cost are their minimums. c. the marginal product of labor is incre
- Over the short run, total cost is equal to: a) average total cost plus marginal cost. b) total fixed cost plus total variable cost. c) total variable cost multiplied by average total cost. d) average fixed cost multiplied by average variable cost.
- If the marginal cost curve is below the average variable cost curve, then A. average variable costs are increasing. B. average variable costs are decreasing. C. marginal cost must be decreasing. D. average variable costs could either be increasing or decr
- If marginal cost is above average cost, then: a. average cost is decreasing b. marginal cost must be decreasing c. average cost is constant d. average cost is increasing e. it is not possible to determine if any of the above is true from the information g
- The marginal cost curve intersects the average variable cost curve at the {Blank} value of the average variable cost curve. A. maximum B. minimum C. zero D. average 2. Marginal cost is {Blank} average variable cost when {Blank} A. equal to; average total
- If the average total cost is decreasing as more and more units are produced, then the marginal cost must be A. rising. B. constant. C. negative. D. below average total cost. E. equal to average total cost.
- If marginal cost less than average total cost, for higher output level _____. a. both average total cost and average variable cost must be falling. b. average total cost must be falling but average variable cost may be rising or falling. c. marginal cost
- If the average variable cost curve is above the marginal cost curve, then: a) marginal costs must be decreasing. b) average variable costs must be increasing. c) marginal costs must be increasing. d) marginal costs can be either increasing or decreasing.
- Average fixed cost plus average variable cost equals A. marginal cost. B. total cost. C. average total cost. D. total variable cost. E. marginal fixed cost.
- If the average total cost is decreasing as more and more units are produced, then the marginal cost must be A) rising. B) constant. C) negative. D) below the average total cost. E) equal to the average total cost.
- When marginal cost is below average variable cost, average variable cost must be: A. above average total cost. B. rising. C. below average total cost. D. falling.
- In the short run, if the average total cost is increasing as output rises, then: A) total fixed costs must be increasing. B) average fixed costs must be increasing. C) average variable cost must be increasing. D) marginal cost must be below average total
- When average total cost is at its minimum point: a. Marginal cost is also at its minimum point, b. Marginal cost is equal to zero, c. Marginal cost is constant, d. Average total cost is equal to marginal cost, e. The firm is maximizing profit.
- If marginal cost is less than average total cost: a. average total cost is at its minimum b. average total cost is falling c. average total cost = 0 d. average total cost is rising
- Average total cost is increasing whenever: A. total cost is increasing B. marginal cost is greater than average total cost C. marginal cost is increasing D. marginal cost is less than average total cost
- Given that the average cost is 5 and the marginal cost is 7, the average cost: a. must decline b. must increase c. is at maximum d. is at minimum e. it is not possible to determine which is correct wi
- If marginal cost is less than average total cost, for a higher output level: a. both average total cost and average variable cost must be falling. b. average total cost must be falling, but the average variable cost may be rising, or falling. c. marginal
- If average total cost is decreasing as more and more units are produced, then marginal cost must be A) rising B) constant C) negative D) below average total cost E) equal to average total cost
- The marginal cost curve intersects the average variable cost curve at the value of the average variable cost curve. a. maximum b. minimum c. zero d. average
- When an average cost is minimum, marginal cost is a. also at its lowest value b. decreasing c. greater than average cost d. equal to average cost
- Total cost divided by the quantity of output is a. average variable cost. b. average total cost. c. average fixed cost. d. marginal cost. e. total variable cost.
- Marginal cost intersects average variable cost: A. when average variable cost is increasing. B. when average variable cost is decreasing. C. at the lowest point of MC. D. at the lowest point of AVC. E. None of the above; they do not intersect.
- In the short run, if the marginal cost of production is equal to the average total cost of production, then the average total cost is: A) less than the average variable cost. B) less than the average fixed cost. C) maximized. D) minimized. E) equal t
- A firm shuts down if price is: A) above minimum average variable cost. B) below minimum average variable cost. C) above minimum average fixed cost. D) less than marginal cost below average total cost.
- A firm shuts down if the price is? A) below average total cost. B) above minimum average fixed cost. C) below minimum average variable cost. D) above minimum average variable cost. E) less than marginal cost.
- A firm shuts down if price is: A) below average total cost. B) above minimum average fixed cost. C) below minimum average variable cost. D) above minimum average variable cost. E) less than marginal cost.
- Given marginal cost is 3 + (3/2)q and the average variable cost is (30/q) + (3q/4), show that the marginal cost is always above the average variable cost.
- The range over which average variable cost is decreasing is the same as the range over which: A) average product is decreasing. B) average product is increasing C) average fixed cost is decreasing D) marginal cost is increasing E) marginal product is
- A firm shuts down if price: a. is above minimum average variable cost. b. is above minimum average fixed cost. c. is below average total cost. d. is below minimum average variable cost. e. is less than marginal cost.
- In the short-run, under what conditions should the firm shut down? a) average total cost at the minimum point. b) price greater than average variable costs. c) price less than average variable costs. d) marginal revenue greater than marginal costs. e) ma
- In the short-run, under what conditions should the firm shut down (a) average total cost at the minimum point (b) price greater than average variable costs (c) price less than average variable costs (d) marginal revenue greater than marginal costs (e) mar
- When the average product of the variable input is equal to the marginal product, a. marginal cost reaches its minimum value. b. average variable cost reaches its minimum value. c. marginal cost is rising. d. Both a and c. e. Both b and c.
- If marginal cost is less than average cost, at current levels of production, a. average cost is increasing with output. b. average cost is decreasing with output. c. total cost is decreasing. d. average cost is at a minimum.
- When the average total cost curve is at its minimum, we know that the: a. marginal cost curve is above the average total cost curve. b. marginal cost curve intersects the average total cost curve. c. average fixed cost curve is above the marginal cost
- If the total variable cost curve is rising: a. the marginal cost is decreasing. b. the marginal cost is increasing. c. the average fixed cost is constant. d. the average fixed cost is increasing.
- Marginal cost is equal to average variable cost a. when average variable cost is getting larger. b. when average variable cost is at its minimum value. c. when average variable cost is getting smalle
- If the average variable cost of a firm is falling, then the: ____. a. marginal cost must be falling. b. average fixed cost must be rising. c. marginal cost lies below the average variable cost. d. marginal cost must be rising. e. marginal cost lies above
- If the marginal cost of production is smaller than the average total cost, does this tell you whether the average total cost is increasing or decreasing? What if the marginal cost is equal to the aver
- Define marginal cost, average total cost, average variable cost, and average fixed cost.
- If the marginal cost is $50 and the average total cost is $75, we can be sure that: a. marginal cost is rising. b. average total cost is rising. c. marginal cost is falling. d. average total cost is falling.
- The marginal cost curve passes through the average variable cost curve at the point of: a. maximum marginal cost. b. minimum average variable cost. c. minimum marginal cost. d. maximum average variable cost.
- If average cost is decreasing a) marginal cost is less than average b) Marginal cost equals average cost c) Marginal cost exceeds average cost d) Not enough information
- When marginal cost exceeds average total cost, A. average fixed cost must be rising. B. average total cost must be rising. C. average total cost must be falling. D. marginal cost must be falling.
- When marginal cost exceeds the average total cost: a. The average fixed cost must be rising, b. The average total cost must be rising, c. The average total cost must be falling, d. The marginal cost must be falling.
- The marginal cost curve passes through the _ points of the _ cost curve and the _ cost curve. a. maximum; total cost; total variable b. minimum; average total; average variable c. minimum; average var
- The sum of fixed and variable costs is: A. total cost B. marginal cost C. variable cost D. average cost
- The range of output over which a firm's average variable cost is decreasing is the same as the range over which its A. marginal cost is increasing. B. average product is increasing. C. average product is decreasing. D. average fixed cost is decreasing.
- When marginal cost is less than the average total cost A) average total cost is rising. B) average variable cost must be falling. C) average total cost is falling. D) marginal cost must be falling.
- Graph the marginal cost, average variable cost, average total cost, and average fixed cost of a firm.
- A profit-maximizing firm will shut down in the short run when a. price is less than the average variable cost. b. price is less than the average total cost. c. average revenue is greater than marginal cost. d. average revenue is greater than the average f
- When a firm is experiencing diseconomies of scale, long-run: a. average total cost is minimized, b. average total cost is greater than the long-run marginal cost, c. average total cost is less than the long-run marginal cost, d. marginal cost is minimi
- Marginal cost intersects average variable cost: a. when average variable cost is increasing. b. when average variable cost is decreasing. c. at the lowest point of MC. d. at the lowest point of AV
- Where long run average cost equals short run average cost, a) short run average cost is minimized. b) long run average variable cost equals short run average variable cost. c) long run average cost equals long run marginal cost. d) long run average cost i
- The sum of fixed cost and variable cost at any rate of output is equal to: a. Average total cost. b. Total profit. c. Total cost. d. Marginal cost.
- Optimal price regulation sets price equal to: a. average variable cost. b. average cost. c. marginal cost. d. minimum average cost.
- If average total cost is rising (a) marginal cost is above average total cost. (b) marginal cost is rising. (c) marginal product is rising. (d) marginal cost is above average total cost and is falling.
- A firm has the short-run total cost function C(q)=100+10q-2q^2+q^3. a) Derive the equations for average total cost, average fixed cost, average variable cost, and marginal cost. b) Derive the short-ru
- Decreasing returns to a variable factor implies: a. Decreasing average variable cost. b. Increasing average variable cost. c. Increasing average fixed cost. d. Constant average total cost. e. Constant average variable cost.
- The marginal cost of production must always: a. be equal to the minimum of the average total cost of production. b. be equal to the minimum of both the average total cost and the average variable costs of production. c. be higher than the fixed costs of p
- A firm will earn normal profits when price: a. equals average total cost. b. equals average variable cost. c. equals marginal cost. d. exceeds minimum average total cost.
- When diminishing marginal returns set in, a. average product is increasing. b. average variable cost is decreasing. c. average cost is decreasing. d. none of above.
- Total cost is a. the sum of variable cost and fixed cost. b. average variable cost times quantity. c. the sum of average fixed cost and marginal cost. d. the sum of fixed cost and average variable cost.
- When price is greater than average variable cost but less than average total cost at the profit-maximizing level of output, a firm should: a. continue to produce the level of output at which marginal revenue equals marginal cost. b. shutdown to minimize i
- If marginal cost is less than average cost at all output levels A. marginal cost must be falling. B. average cost must be falling. C. average cost must be rising. D. none of these.
- When the average total cost curve is at its minimum? a. average variable cost curve intersects the average total cost curve. b. average variable cost curve is above the average total cost curve. c. ma
- Total revenue divided by output equals: a. average variable cost b. marginal cost c. price d. average total cost
- When a firm is experiencing economies of scale, long-run: a. average total cost is minimized, b. average total cost is greater than long-run marginal cost, c. average total cost is less than long-run marginal cost, d. marginal cost is minimized.
- In the short run, the marginal cost curve crosses the average total cost curve at: A. a point just below the average fixed cost curve. B. the minimum point of the average total cost curve. C. the maxi
- Economic profit is defined as _? 1. average revenue minus average variable cost 2. marginal revenue minus opportunity costs 3. total fixed cost plus total variable cost 4. total revenue minus tota
- A competitive firm's short-run supply curve is its cost curve above its cost curve. a. average total cost, marginal b. average variable, marginal c. marginal, average total d. marginal, average variable
- A perfectly competitive firm should shut down in the short run if price falls below the minimum of: A) average variable costs. B) marginal revenue. C) average total cost. D) fixed costs. E) marginal cost.
- When marginal cost is below average variable cost, average variable cost must be a. at its maximum. b. rising c. falling. d. at its minimum.
- Short-run profit maximization for a perfectly competitive firm occurs when firm's marginal cost equals a. average total cost. b. average variable cost c. marginal revenue. d. All of the above.
- If average costs and marginal costs are constant then: (a) average variable costs must be increasing. (b) there are decreasing returns to scale. (c) there are no fixed costs of production. (d) None of the above.
- When a firm's marginal cost is rising, we know that: A) average fixed cost must be rising. B) average variable cost must be rising. C) average total cost must be rising. D) marginal product must be zero. E) marginal product must be falling.
- When marginal cost is above average variable cost, average variable cost must be: A. At its maximum. B. Rising. C. At its minimum. D. Falling.
- The total cost of production equals ___. a. average total cost + average variable cost b. average total cost + average fixed cost c. average variable cost + average fixed cost d. total fixed cost + total variable cost e. marginal cost + total variable
- Assume both the marginal cost and the average variable cost curves are U-shaped. At the minimum point on the AVC curve, marginal cost must be a. greater than the average variable cost. b. less than the average variable cost. c. equal to the average variab
- Average total cost a. increases as output increases. b. decreases as output increases. c. increases if marginal cost is increasing. d. increases if marginal cost is greater than average total cost. e. Both c and d.
- A competitive firm's short-run supply curve is its ...................... cost curve above its ...................... cost curve. a. average variable, marginal b. average total, marginal c. marginal, average total d. marginal, average variable
- Which cost always increases as output increases? A. Total cost B. Average total cost C. Marginal cost D. Average fixed cost
- Quantity of Output Fixed Cost Variable Cost Total Cost Average Fixed Cost Average Variable Cost Average Total Cost Marginal Cost 1 $23 $33 2 $38 3 $70 4 $64 5 $110 6 $118 7 $143 8 $185 Refer to Table
- A competitive firm's short-run supply curve is its cost curve above its cost curve. a. average total, marginal b. average variable, marginal c. marginal, average total d. marginal, average variable
- When price is greater than average variable cost but less than average total cost at the profit-maximizing level of output, a firm should _____. a. continue to produce the level of output at which marginal revenue equals marginal cost b. shutdown to minim
- When marginal costs are increasing: a. marginal costs are always greater than average costs. b. a firm is experiencing diminishing returns. c. average cost is always increasing. d. average cost is alw