8 The relationship between the marginal cost average variabl

8. The relationship between the marginal cost, average variable cost and the average total cost schedule is such that: A. if MC is increasing, ATC must also be increasing. B. if MC exceeds AVC, AVC may be rising or falling. C. if MC is above ATC and increasing, then the firm should reduce its output D. None of the above is correct ?? ??? AVC AFC Quantity

Solution

a) \"A\" If the MC is increasing, ATC must also be increasing.

When the marginal cost of the firm is rising the average cost of production will also rise. There is no case where the MC is increased leaving the ATC low. The answer is \"A\".