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If the 15th unit of output has a marginal cost of $29.50 and the average cost...

  1. If the 15th unit of output has a marginal cost of $29.50 and the average cost of producing 14 units of output is $30.23, what will happen to the average cost of production if the 15th unit is produced?

    1. Average cost will fall.

My question is why will Average cost fall?

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Answer #1

If the 15th unit of output has a marginal cost of $29.50 and the average cost of producing 14 units of output is $30.23, what will happen to the average cost of production if the 15th unit is produced?

Answer: Average cost will fall.

Explanation: The average cost will fall because marginal cost is the additional cost required for producing one additional unit of output. If an additional unit is produced, the total costs will increase. However, the marginal cost is less than average total cost, the average total cost will fall since total costs are increased at a decreasing rate.

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