Asked by Javier Lopez on Jul 22, 2024

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Suppose the marginal cost curve in the short run first decreases and then increases.If marginal cost is decreasing,_____ must be _____ and _____ must be _____.

A) marginal product;increasing;average fixed cost;zero
B) average variable cost;decreasing;average fixed cost;increasing
C) average total cost;increasing;marginal cost;decreasing
D) marginal product;increasing;average variable cost;decreasing

Marginal Product

The marginal product is the additional output produced as a result of using one more unit of a particular input, holding all other inputs constant.

Average Variable Cost

The total variable costs divided by the quantity of output produced, indicating the variable cost per unit of output.

Average Fixed Cost

Average fixed cost is the fixed cost per unit of output, calculated by dividing total fixed costs by the number of units produced, which decreases as production increases.

  • Illustrate the link between marginal product and marginal cost.
  • Gain insight into the theory of average total, average variable, and average fixed costs.
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VS
Vishal SattaJul 24, 2024
Final Answer :
D
Explanation :
When marginal cost is decreasing, it implies that each additional unit of output is costing less to produce than the previous one, which typically happens when the marginal product of labor (or other inputs) is increasing. This is because the firm is becoming more efficient in its production process. Additionally, if the marginal cost is decreasing, the average variable cost must also be decreasing because the cost of producing each additional unit is lower, thus pulling the average variable costs down.