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When shape of average cost curve is upward, marginal cost :
- a)Must be decreasing
- b)Must be constant
- c)Must be rising
- d)Any of these
Correct answer is option 'C'. Can you explain this answer?
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Verified Answer
When shape of average cost curve is upward, marginal cost :a)Must be d...
When average cost curve rises, marginal cost too rises, but rate of increase in marginal cost is more than that of average cost.
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When shape of average cost curve is upward, marginal cost :a)Must be d...
Explanation:
The shape of the average cost curve (AC) represents the average cost per unit of output as output increases. It is a U-shaped curve due to economies and diseconomies of scale.
When the AC curve is upward sloping, it means that the average cost per unit of output is increasing as output increases. This can occur when there are diseconomies of scale, and a firm is experiencing higher costs due to factors such as increased complexity, communication difficulties, or coordination problems.
However, the shape of the marginal cost curve (MC) is independent of the shape of the AC curve. The MC curve represents the additional cost of producing one more unit of output.
The relationship between the shape of the AC curve and the MC curve is as follows:
- If the MC curve is below the AC curve, the AC curve is falling.
- If the MC curve is above the AC curve, the AC curve is rising.
- If the MC curve intersects the AC curve at its minimum point, the AC curve is at its lowest point.
Therefore, when the AC curve is upward sloping, the MC curve must be rising. This is because if the additional cost of producing one more unit of output is increasing, it will increase the average cost per unit of output.
Thus, the correct answer is option 'C': the marginal cost must be rising when the shape of the average cost curve is upward sloping.
The shape of the average cost curve (AC) represents the average cost per unit of output as output increases. It is a U-shaped curve due to economies and diseconomies of scale.
When the AC curve is upward sloping, it means that the average cost per unit of output is increasing as output increases. This can occur when there are diseconomies of scale, and a firm is experiencing higher costs due to factors such as increased complexity, communication difficulties, or coordination problems.
However, the shape of the marginal cost curve (MC) is independent of the shape of the AC curve. The MC curve represents the additional cost of producing one more unit of output.
The relationship between the shape of the AC curve and the MC curve is as follows:
- If the MC curve is below the AC curve, the AC curve is falling.
- If the MC curve is above the AC curve, the AC curve is rising.
- If the MC curve intersects the AC curve at its minimum point, the AC curve is at its lowest point.
Therefore, when the AC curve is upward sloping, the MC curve must be rising. This is because if the additional cost of producing one more unit of output is increasing, it will increase the average cost per unit of output.
Thus, the correct answer is option 'C': the marginal cost must be rising when the shape of the average cost curve is upward sloping.
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When shape of average cost curve is upward, marginal cost :a)Must be decreasingb)Must be constantc)Must be risingd)Any of theseCorrect answer is option 'C'. Can you explain this answer?
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