CFA Practice Question

There are 539 practice questions for this study session.

CFA Practice Question

If marginal cost is increasing but is less than average total cost, what do we know about average total cost?
A. Average total cost is increasing.
B. Average total cost is decreasing.
C. Either of these statements could be true.
Explanation: If marginal cost, the change in total cost divided by the change in quantity, is less than average total cost, the average must decrease. The fact that marginal cost is increasing is irrelevant; as long as the change is smaller than the average, the average must fall.

User Contributed Comments 1

User Comment
chuong MC is under the ATC -> ATC alway decrease regardless MC increase or decrease
MC is above the ATC -> ATC increase while MC increase
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