Question

If marginal cost is greater than average total cost, then

Answer 1

Answer:

d. the average total cost is increasing.

Explanation:

The average total cost if the average cost of producing one unit, where as the marginal cost if the additional cost of producing an additional unit, so when the marginal cost is greater than the average total cost, it means that producing new units will drive the average total cost up because the cost to produce one more unit is more than the average total cost. This means that the new unit being produced costs more than the previous units produced if we take an average. We can also prove this mathematically.

If a factory produces 100 units, at a total cost of 10,000.

The average total cost if 10,000/100=100

If the marginal cost is greater than the average cost for example it is 150 then the total cost is 10,000+150=10,150

Also the average total cost will be 10,150/101=100.49

This shows that when the marginal cost is greater than average total cost the average total cost is increasing.