The marginal cost for a firm of production the 9th unit of output is ₹...
Introduction:
In this scenario, we are given that the marginal cost of producing the 9th unit of output is ₹20 and the average cost at the same level of output is ₹15. We need to determine the relationship between the marginal cost and average cost based on this information.
Marginal Cost:
The marginal cost is the additional cost incurred by a firm to produce one additional unit of output. In this case, the marginal cost of producing the 9th unit is ₹20.
Average Cost:
The average cost is the total cost incurred by a firm to produce a given level of output divided by the quantity of output. In this case, the average cost at the 9th unit of output is ₹15.
Relationship between Marginal Cost and Average Cost:
To determine the relationship between marginal cost and average cost, we need to compare their values at the same level of output.
If the marginal cost is less than the average cost, it will pull the average cost down as the additional cost of producing the last unit is lower than the average cost. This implies that the marginal cost curve lies below the average cost curve, and the average cost is falling.
Conversely, if the marginal cost is greater than the average cost, it will pull the average cost up as the additional cost of producing the last unit is higher than the average cost. This implies that the marginal cost curve lies above the average cost curve, and the average cost is rising.
Answer:
In this scenario, since the marginal cost of producing the 9th unit (₹20) is greater than the average cost at the same level of output (₹15), we can conclude that the marginal cost is rising and the average cost is falling. Therefore, the correct answer is option C) marginal cost is rising and average cost is falling.
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