# When marginal cost is above average variable cost, average variable cost must be: A. At its...

## Question:

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.

## Marginal Cost and Average Marginal Cost:

Marginal Cost (MC) is the cost of producing one additional unit of output and AVC is the average variable cost of production, that is, the total variable cost divided by the total unit of output.

#### Marginal Cost Facts

- Marginal Cost is the change in total cost divided by the change in quantity produced. Marginal cost is equal to the average total cost at its minimum value.
- Total cost is minimized where marginal cost is zero. This is because marginal cost is the derivative of the total cost, and from calculus when the derivative is equal to zero, a minimum is achieved.
- To maximize profit, a firm operates at the point where marginal cost is equal to marginal revenue. Managers need to "think of the margins."

## Answer and Explanation:

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

View this answerSee 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 9Marginal costs are the costs it takes to produce different amounts of a given product. Learn how to calculate marginal costs, total costs, and average costs, and the ways that these are used to determine an ideal price per unit of a good.

#### Related to this Question

- 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.
- 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
- 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.
- 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
- When will the marginal cost intersect the average variable cost curve? a. when the average variable cost curve is rising b. where average variable cost curve equals price c. at the minimum point of
- 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 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 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
- 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
- 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 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.
- 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
- 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 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 marginal cost is increasing, what do we know about average cost? a. If marginal cost is increasing, average costs could be rising, falling, or constant. The direction of average costs depends upon whether marginal cost is higher or lower than average c
- 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.
- When marginal costs are increasing: Select one: a. average cost is always increasing. b. marginal costs are always greater than average costs. c. average cost is always decreasing. d. a firm is e
- 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
- 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
- Assume both the marginal cost and the average variable cost curves are U-shaped. At the minimum point on the AVC curve, the marginal cost must be: a. greater than the average variable cost. b. less than the average variable cost. c. equal to the averag
- When the average cost is increasing marginal cost?
- 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
- 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
- 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
- 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.
- 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 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 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 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
- 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.
- If marginal product is at a maximum, the: a. marginal cost is at a minimum. b. average variable cost is at a maximum. c. total fixed cost is at a maximum. d. average total cost is at a maximum. e. none of the above
- Optimal price regulation sets price equal to: a. average variable cost. b. average cost. c. marginal cost. d. minimum average cost.
- 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 marginal costs increase (due to falling marginal product of a variable input), how does this change average (total) costs? How about average variable costs?
- 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
- 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 maximum marginal product corresponds with: Select one: a. maximum marginal cost. b. minimum marginal cost. c. minimum average variable cost. d. minimum average total 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.
- 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.
- 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 var
- When average product is at its maximum, a. Marginal cost is also at its maximum. b. Marginal revenue product is also at its maximum. c. Marginal cost is at its minimum. d. Average variable cost is at its minimum. e. None of the above.
- 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.
- 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
- 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
- If the marginal cost is falling, what must be true about average variable cost and average total cost?
- 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.
- Suppose an entrepreneur wants to maximize profits without affecting his price. He must produce an output where: a. marginal cost is equal to the average variable cost. b. average variable cost is minimum. c. average fixed cost is minimum. d. average cost
- Is the supply curve the rising portion of the marginal cost curve over and above the minimum of the average variable cost curve?
- 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
- 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.
- 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.
- 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 inc
- 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.
- 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
- 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.
- When does a firm's average variable cost exceed the average total cost? Select one: a. when the average variable cost is at its minimum b. never c. when the average fixed cost is at its minimum d. whe
- 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
- At the point of inflection on the total cost curve, a. marginal and average costs are equal. b. marginal cost is maximum. c. marginal cost is minimum. d. average cost is minimum. e. marginal product is minimum.
- In long-run competitive market equilibrium, price equals: a) minimum average variable cost b) minimum average total cost c) maximum marginal cost d) minimum fixed cost
- Average variable cost is at a minimum at the same amount of output at which the A. average product is at a minimum. B. marginal product is at a minimum. C. marginal product is at a maximum. D. average product is at a maximum.
- 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.
- When the output elasticity of total cost is less than one, _____. A. Marginal cost is less than average cost, and average cost decreases as quantity increases. B. Marginal cost is less than average cost, and average cost increases as quantity increases.
- if marginal costs are increasing, what is happening to average variable costs?
- The loss minimization point for a firm is: A. when at the minimum point on the average total cost curve B. when at the minimum point on the average variable cost curve C. where marginal cost equals marginal revenue D. when total revenue is maximized
- When marginal cost is greater than the average variable cost, what happens to the average?
- 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
- The marginal cost curve intersects the average variable cost curve at the level of output where average variable cost is at a minimum because: A. the firm begins benefiting from division of labor at this quantity. B. when the marginal cost of the last un
- Why does marginal cost cut average cost and average variable cost in a minimum level?
- When the price of a variable input increases what will happen to the average total cost, the average variable cost, average fixed cost, and marginal cost curves?
- a. When marginal cost is lower than average variable cost, what is happening to average variable cost? b.When marginal cost is above average variable cost, what is happening to average variable cost? c. Why are the relationships you described in part a.
- Marginal cost equals 1. average variable cost at its maximum point 2. the change in total fixed cost divided by the change in quantity 3. the change in total variable cost divided by the change in qua
- A perfectly competitive firm's supply curve is its: a) marginal cost curve above the minimum of its average fixed cost. b) marginal cost curve above its minimum average variable cost. c) marginal co
- The short-run marginal cost of a good generally _______. (a) intersects the maximum points of both the average variable cost and the average total cost curves (b) falls for a time, but then begins to rise when the point of diminishing returns is reached (
- Define marginal cost, average total cost, average variable cost, and average fixed 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.
- Marginal cost is the slope of the: a. variable cost curve. b. total product curve. c. marginal curve. d. average cost curve.
- 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
- Diminishing marginal returns implies: a. decreasing average variable costs. b. decreasing marginal costs. c. increasing marginal costs. d. decreasing average fixed costs. e. none of the above
- Suppose that the cost function of X is given by: C = 500 - 10 X + 5 X^2. a) Find the variable cost and the fixed cost. b) Find the average cost and the marginal cost. c) Find the point where marginal cost equals average cost. d) Find the point where the a
- 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
- 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
- The marginal cost curve will cut which of the following curves at its respective minimum point? (A) the average total cost curve (B) the average variable cost curve (C) the average fixed cost curve
- Marginal cost is the slope of the: a. variable cost. b. total product curve. c. marginal product curve. d. average cost curve.
- 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 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
- Determine the marginal cost, short-run average cost curve, and the long-run average total cost curve.
- 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
- A firm's short-run supply curve is equal to the firm's: a. marginal cost curve above minimum average total cost (ATC). b. demand curve. c. marginal revenue curve. d. marginal cost curve below minimum average variable cost (AVC). e. marginal cost curv
- If the marginal cost of production exceeds the average cost of production, then: 1) the marginal cost is falling. 2) the marginal cost is rising. 3) the average cost is falling. 4) the average cost is rising. 5) the firm should shut down.
- An entrepreneur wants to maximize profits without affecting his price. He must produce an output where: a. marginal cost is equal to the average variable cost. b. average variable cost is minimum. c. average fixed cost is minimum. d. average cost is minim
- Diminishing marginal returns implies: a) increasing marginal costs. b) decreasing marginal costs. c) decreasing average fixed costs. d) decreasing average variable costs.
- 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 short-run supply curve is equal to the firm's a) marginal revenue curve. b) demand curve. c) marginal cost curve above the minimum average total cost (ATC). d) marginal cost curve below the minimum average variable cost (AVC). e) marginal cost curv
- 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.
- The marginal cost curve slopes downward at low outputs because of _____. The marginal cost curve eventually slopes upward because of _____. A) the law of diminishing returns; increasing average fixed cost. B) the law of diminishing returns; greater specia
- What happens along the average total cost curve as marginal cost is decreasing?
- 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
- The marginal cost curve intersects the average total cost curve at the level of output where the average total cost is at a minimum because: A. the firm begins experiencing economies of scale at this quantity. B. when the marginal cost of the last unit pr