ECONOMICS
PROFIT
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
if MC < ATC, then ATC is minimised.
|
|
|
If MC = ATC, then ATC is at maximum.
|
|
|
If MC > ATC, then MC is decreasing.
|
|
|
If MC < ATC, then ATC is decreasing.
|
Detailed explanation-1: -Answer and Explanation: The correct option is d) When MC exceeds AVC, AVC must be rising. The relationship between MC, AVC and ATC is explained below: AVC and ATC both are falling when MC is falling.
Detailed explanation-2: -When AVC and ATC are falling, MC must be below the average cost curves. When AVC and ATC are rising, MC must be above the average cost curves. Therefore, MC intersects the average cost curves at the average cost curves’ minimum points.
Detailed explanation-3: -When the MC curve is lower than the AC curve, i.e., the MC < AC the average cost will tend to fall as if you take a lower number and add it to the average and then take a new average, the new average has to be lower.
Detailed explanation-4: -Answer and Explanation: The answer is (b) If MC is greater than ATC and AVC, then ATC and AVC will increase. When the marginal cost (MC) curve is above the average total cost (ATC) curve and average variable cost (AVC) curve, then increasing the production by a unit increases both the ATC and AVC.
Detailed explanation-5: -Because MC is the cost of producing the next unit, when it is below AVC, AVC must be falling. AVC falls because MC is the cost of the next unit produced; therefore, when the next unit costs less than the average, it must be pulling the average down.