Question

"At quantities below the minimum-cost output," marginal cost is less than average total cost and average total cost is falling. marginal cost is greater than average total cost and average total cost is rising. marginal cost is greater than average total cost and average total cost is falling. marginal cost is equal to average total cost.

Answer 1

Answer: The correct answer is (a) Marginal Cost (MC) is less than Average Total Cost (ATC) and ATC is falling.

Step-by-step explanation:

Looking at a cost graph with MC curve and ATC curve, initially, MC falls at a faster rate than ATC and MC remains below ATC.

Next, ATC reaches its minimum and MC cuts it from below. At this point - the minimum cost point - ATC=MC.

In the third stage, MC and ATC begin to rise and again, MC rises faster than ATC. This makes MC curve to be above ATC curve all through.

So at quantities below the minimum-cost output point (at quantities to the left of the minimum-cost output),

"MC is less than ATC and ATC is falling"

(NOTE: Price/Cost is usually indicated on the y-axis or vertical axis WHILE Quantity/Output is usually represented on the x-axis or horizontal axis of the graph)