Answer to Question #64057 in Microeconomics for Alee Lor

Question

As quantity increases, which of the following must be true if average total costs are rising?
Select one:
a. Marginal cost must be greater than average total cost.
b. Marginal cost must be less than average total cost.
c. Average fixed cost must be increasing.
d. Average fixed cost must be less than average variable cost.

Answer 1

If quantity increases and average total costs are rising, then marginal cost must be greater than average total cost, because ATC curve starts rising after the intersection with MC curve, which is increasing much more steeper.
So, the correct answer is:
a. Marginal cost must be greater than average total cost.