Question

Consider a firm making production decisions in the short run. Select the statement(s) that must be correct. Choose one or more: A. Average total cost will always exceed average variable cost. B. Average total cost cannot decline as output increases, at any level of output. C. Average fixed cost cannot increase with output, at any level of output. D. Average variable cost is always above the average fixed cost. E. Average variable cost cannot decline with output, at any level of output.

Answer 1

Answer:

A). Average total cost will always exceed average variable cost.

C). Average fixed cost cannot increase with output, at any level of output

Explanation:

• In the short term, a company that increases its profits will increase production if the marginal cost is less than the marginal income.
• Reduction in production if marginal cost exceeds marginal income. Continue production when the average variable cost is less than the unit.        
• so correct answer is A and C