If marginal cost is less than average cost at all output lev

If marginal cost is less than average cost at all output levels

marginal cost must be falling.

average cost must be falling.

average cost must be rising.

none of these.

Solution

B.  average cost must be falling.

Marginal cost is the cost of prdouction of one additional unit. So if the marginal cost is lower than the average cost, that means with every new unit , it will lower the average cost as shown in example below:

If the total cost is 100 for 10 units, in this case average cost will be $10 per unit

now the cost for next unit is 9 that is also the marginal cost for 11th unit

so total cost for 11 units will be =100+9=109

average cost for 11 units = 109/11=9.91 per unit

thus average cost fall.