What is the relationship between marginal cost and average cost when the average cost is decreasing and when it is increasing?

Show Answers

Marginal cost is higher than average cost in both casesMarginal cost is lower than average cost when average cost is falling, and higher than average cost when average cost is risingMarginal cost is lower than average cost in both situationsMarginal cost is higher than average cost when average cost is decreasing, and lower than average cost when average cost is increasingMarginal cost equals average cost regardless of average cost trend

Explanation

When the average cost is declining, the marginal cost lies below the average cost, pulling it down. Conversely, when the average cost is rising, the marginal cost is above the average cost, causing it to increase.