Question

In the short run, average cost may fall as output increases, due to:a. rising average fixed costs riseb. falling average fixed costs fallc. increasing marginal productd. falling average fixed costs fall and increasing marginal product

Answer 1

Answer:

falling average fixed costs fall and increasing marginal product

Explanation:

To solve this question two things two remember:

1. $Av.\,Cost=\frac{Total\,Cost}{Q}=\frac{Fixed\,Cost}{Q} +\frac{Variable\,Cost}{Q}$
2. . Marginal Product is inversely related to marginal cost, so if the marginal product is increasing, it means that the marginal cost is decreasing

Then from equation one Av. Costs will decrease as output increases for two reasons: If Fixed Costs are decreasing and if Marginal Costs are decreasing (= Marginal Product increasing)