If marginal cost is less than the average variable cost and output increases, average total cost ________ and average variable cost ____________ OPTIONS: (a) decrease, increase (b) increase, decrease (c) increase, increase (d) decrease, decrease

If marginal cost is less than the average variable cost and output increases, average total cost and average variable cost ____ OPTIONS: (a) decrease, increase (b) increase, decrease (c) increase, increase (d) decrease, decrease

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter3: Benefits, Costs, And Decisions

Section: Chapter Questions

Problem 8MC

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Concept explainers

Cost of Production

In economic theory, production costs are the costs incurred by an industrial organization when it engineers a project or provides a service that generates revenue and benefits. Labor costs, raw materials, consumable manufacturing costs, and general overhead sum up, accounting for production costs. Total cost data is calculated by combining total direct costs of materials, labor costs, and total production costs.

Question

If marginal cost is less than the average variable cost and output increases, average total cost ________ and average variable cost ____________

OPTIONS:

(a) decrease, increase

(b) increase, decrease

(d) decrease, decrease

Definition Definition Total cost of producing a certain quantity of a good, divided by the quantity produced. It is the sum of all costs (fixed and variable) required to produce one unit of output.

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