Practice question · Select all that apply
Which are true about the MC-AC relationship?
Hints
- The marginal value pulls the average toward itself.
- They cross where the average stops falling.
Show the answer
- A. MC crosses AC at the minimum of AC
- B. When MC < AC, average cost is falling
- C. When MC > AC, average cost is rising
Why
MC pulls the average down when below it and pushes it up when above it, they must cross at the minimum. MC is not always above AC.
Practise Production and Costs
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