Question

If marginal cost exceeds average variable cost,

average variable cost is decreasing

average variable cost is negative

average variable cost is increasing

marginal cost is greater than average total cost

average fixed cost is increasing

If marginal cost exceeds average variable cost,

average variable cost is decreasing

average variable cost is negative

average variable cost is increasing

marginal cost is greater than average total cost

average fixed cost is increasing

Which of the following is true of marginal product?

When marginal product is falling, total product is falling.

The firm should produce where marginal product is increasing.

When marginal product is increasing, total product is increasing by increasing amounts.

The firm should produce where marginal product is zero.

The firm should produce where marginal product is greatest.

Answer 1

1. Option C.

• If the marginal cost exceeds average variable cost, the average variable cost is increasing.
• The marginal costs and average costs have positive relationship between them.
• That is when the marginal cost is rising, the average cost also rises and vice versa.
• We know that the marginal cost cuts AVC at its minimum, hence when the marginal cost increases more than the average variable cost, it rises too.

2. Option C.

• When marginal product is increasing, total product is increasing by increasing amounts.
• When one factor of production is fixed and others are varied, the marginal product increases with the total product in an increasing rate.
• This makes the total product curve to be convex in shape until the marginal product curve reaches its maximum.