Question : If the average cost falls, the marginal cost
Option 1: increase at a higher rate
Option 2: to fall at the same rate
Option 3: increases at a lower rate
Option 4: to fall at a higher rate
Correct Answer: to fall at the same rate
Solution : The correct answer is to fall at the same rate .
Average cost is the total cost of manufacturing divided by the total number of units. On the other hand, marginal cost is the expenses needed to manufacture one incremental good. So, when the average cost falls the cost of manufacturing is decreasing, then producing one incremental good will be similarly affected as the average cost.
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