When average total cost is declining then:

Question

a) marginal cost must be less than average cost
b) marginal cost must be greater than average cost
c) average toal cost must be greater than average fixed cost
d) average variable cost must be declining.

My answer is d but my friend thinks a so now i'm not sure as the example i have both fit!

Thanks

Answer 1

The correct answer is d) average variable cost must be declining. When average total cost is declining, it means that the average variable cost is decreasing, while the average fixed cost remains constant.