D. All of the above
If Average Total Cost Is Increasing As Output Increases, A. Average Fixed Costs Will Also Be Increasing. B. Average Variable Costs Must Be Decreasing. C. Marginal Cost Must Be Greater Than Average Total Cost. D. All Of The Above Are True?
The only answer that must be true is C: Marginal cost must be greater than average total cost.
The only way to make an average go up by adding numbers is to add numbers that are higher than the average. Each additional unit's cost (marginal cost) must be greater than the average total cost for the average total cost to increase by producing more.
Example I have produced 10 units at an average total cost of $5 per unit. My total cost must be
10*$5 = $50.
If my marginal cost is now $6 (higher than the average), then my total cost for 11 units will be
$50 + $6 = $56
And my new average total cost will be
$56/11 = $5.09 (higher than before)
The only way to make an average go up by adding numbers is to add numbers that are higher than the average. Each additional unit's cost (marginal cost) must be greater than the average total cost for the average total cost to increase by producing more.
Example I have produced 10 units at an average total cost of $5 per unit. My total cost must be
10*$5 = $50.
If my marginal cost is now $6 (higher than the average), then my total cost for 11 units will be
$50 + $6 = $56
And my new average total cost will be
$56/11 = $5.09 (higher than before)