When the average total cost curve is downward sloping, what must be true about the marginal cost curve?

Question

BlackTom AI · Accepted Answer

When evaluating how the average total cost (ATC) behaves, it's helpful to recall the relationship between ATC and marginal cost (MC).
Option a: 'It is U-shaped.' The U-shape is a common feature of ATC and MC in many models, but the question is about when ATC is downward sloping, not about the general shapes of ATC or MC alone. This statement does not address the specific conditional relationship between ATC and MC when ATC is falling.
Option b: 'It is a straight line.' A straight-line MC would imply a linear relationship with output, which is not a conditional statement about ATC sloping downward. The downward slope of ATC is tied to MC relative to ATC, not to a particular linear form of MC.
Option c: 'It is upward sloping.' If MC were above ATC, ATC would be rising. Therefore, an upward-sloping MC alone does not ensure ATC is downward sloping; this contradicts the established condition that leads to ATC falling. The scenario where ATC falls requires MC to be below ATC, not above it.
Option d: 'It is below the average total cost curve.' This matches the fundamental rule: ATC falls when MC < ATC. When the marginal cost of producing an additional unit is less than the average total cost, each additional unit pulls the average down, causing ATC to slope downward. Conversely, if MC were above ATC, ATC would rise. This option directly expresses the necessary and sufficient condition for the downward-sloping ATC portion.
So, the analysis of the options leads to understanding that the only condition consistent with a downward-sloping ATC curve is MC lying below ATC, which is captured by option d.

THC - MCD2020 - T3 - 2025 Lecture Quiz 6 - Cost of Production

When the average total cost curve is downward sloping, what must be true about the marginal cost curve?

View Explanation

Log in for full answers

Similar Questions

An assumption of the BECOMP model is:

Refer to the accompanying graph to answer the next question. The firm is experiencing gains from specialization up to what level of output along the marginal cost curve?

Part 1In the figure, the marginal cost of the last unit produced by the profit maximizing firm is A. $15. B. $10. C. $5. D. $20. Part 1

A company produces a popular brand of cookies. In the short run, the size of its factory and equipment are fixed, but it can hire more or fewer workers. Suppose the company observes that its marginal product of labor is increasing. What will happen to its marginal cost of production?

When a firm increased its output by one unit, its AC rose from $45 to $50. This implies that its MC after the increase is

More Practical Tools for Students Powered by AI Study Helper

Homework AI Solver

Stylized AI Paper Writer

Plagiarism Checker Assistant

Citation AI Academic Writing Tool

In-Class Translation Assistant

AI Note Generator

AI Quiz Answers

Past Exam Questions from University Test Bank

Smart Practice Assistant

Adaptive Practice

Making Your Study Simpler

THC - MCD2020 - T3 - 2025 Lecture Quiz 6 - Cost of Production

When the average total cost curve is downward sloping, what must be true about the marginal cost curve?

View Explanation

Log in for full answers

Similar Questions

An assumption of the BECOMP model is:

Refer to the accompanying graph to answer the next question. The firm is experiencing gains from specialization up to what level of output along the marginal cost curve?

Part 1In the​ figure, the marginal cost of the last unit produced by the profit maximizing firm is A. ​$15. B. ​$10. C. ​$5. D. ​$20. Part 1

A company produces a popular brand of cookies. In the short run, the size of its factory and equipment are fixed, but it can hire more or fewer workers. Suppose the company observes that its marginal product of labor is increasing. What will happen to its marginal cost of production?

When a firm increased its output by one unit, its AC rose from $45 to $50. This implies that its MC after the increase is

More Practical Tools for Students Powered by AI Study Helper

Making Your Study Simpler

Part 1In the figure, the marginal cost of the last unit produced by the profit maximizing firm is A. $15. B. $10. C. $5. D. $20. Part 1