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Which of the following statements is correct?
- a)When the average cost is rising, the marginal cost must also be rising.
- b)When the average cost is rising, the marginal cost must be falling.
- c)When the average cost is rising, the marginal cost is above the average cost.
- d)When the average cost is falling, the marginal cost must be rising.
Correct answer is option 'C'. Can you explain this answer?
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Most Upvoted Answer
Which of the following statements is correct?a)When the average cost i...
When the average cost is rising, the marginal cost is above the average cost. This means that option C is the correct statement.
Explanation:
Average Cost (AC):
- Average cost is the total cost divided by the quantity of output produced.
- It represents the average cost per unit of output.
Marginal Cost (MC):
- Marginal cost is the additional cost incurred by producing one more unit of output.
- It represents the change in total cost resulting from producing an additional unit of output.
Now let's analyze each option:
a) When the average cost is rising, the marginal cost must also be rising.
- This statement is not necessarily true. The average cost can rise while the marginal cost remains constant or even decreases. It depends on the relationship between the additional cost of producing one more unit and the existing average cost.
b) When the average cost is rising, the marginal cost must be falling.
- This statement is incorrect. If the average cost is rising, it means that the additional cost of producing one more unit is greater than the existing average cost. Therefore, the marginal cost should be above the average cost.
c) When the average cost is rising, the marginal cost is above the average cost.
- This statement is correct. As explained above, if the average cost is rising, it means that the additional cost of producing one more unit is greater than the existing average cost. Hence, the marginal cost is above the average cost.
d) When the average cost is falling, the marginal cost must be rising.
- This statement is not necessarily true. The average cost can fall while the marginal cost remains constant or even decreases. It depends on the relationship between the additional cost of producing one more unit and the existing average cost.
In summary, when the average cost is rising, the marginal cost is above the average cost. This is because the additional cost of producing one more unit is greater than the existing average cost.
Explanation:
Average Cost (AC):
- Average cost is the total cost divided by the quantity of output produced.
- It represents the average cost per unit of output.
Marginal Cost (MC):
- Marginal cost is the additional cost incurred by producing one more unit of output.
- It represents the change in total cost resulting from producing an additional unit of output.
Now let's analyze each option:
a) When the average cost is rising, the marginal cost must also be rising.
- This statement is not necessarily true. The average cost can rise while the marginal cost remains constant or even decreases. It depends on the relationship between the additional cost of producing one more unit and the existing average cost.
b) When the average cost is rising, the marginal cost must be falling.
- This statement is incorrect. If the average cost is rising, it means that the additional cost of producing one more unit is greater than the existing average cost. Therefore, the marginal cost should be above the average cost.
c) When the average cost is rising, the marginal cost is above the average cost.
- This statement is correct. As explained above, if the average cost is rising, it means that the additional cost of producing one more unit is greater than the existing average cost. Hence, the marginal cost is above the average cost.
d) When the average cost is falling, the marginal cost must be rising.
- This statement is not necessarily true. The average cost can fall while the marginal cost remains constant or even decreases. It depends on the relationship between the additional cost of producing one more unit and the existing average cost.
In summary, when the average cost is rising, the marginal cost is above the average cost. This is because the additional cost of producing one more unit is greater than the existing average cost.
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Which of the following statements is correct?a)When the average cost is rising, the marginal cost must also be rising.b)When the average cost is rising, the marginal cost must be falling.c)When the average cost is rising, the marginal cost is above the average cost.d)When the average cost is falling, the marginal cost must be rising.Correct answer is option 'C'. Can you explain this answer?
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