Question

Wilbur's Bean Emporium serves barbeque sandwiches over the lunch hour. The marginal cost of the 50 th barbeque sandwich is $1.50. The average total cost of the 49 th sandwich is $1.75. For Wilbur's Bean Emporium_ 10 when output is 50 sandwiches.

A total costs are falling
B average variable costs are falling
C average total costs are rising
D average total costs are falling

Answer 1

Answer: The answer is "D. average total costs are falling".

Explanation: The average cost curve is derived from the total cost curve, since it is the total cost curve divided by the number of units.

As for the relationship between the average cost curve and the marginal cost curve, when the marginal cost is less than the average cost, the average cost curve is falling. On the contrary, when the marginal cost curve is larger than the average cost curve, the latter is growing. When the Marginal Cost is equal to the Average Cost, it is at its minimum point and therefore the CMe curve will be flat at that point.