Final answer:
The statement that the average total cost exceeds the average variable cost by the value of marginal cost is false. Marginal cost intersects average total and variable costs at their lowest points, and it is average fixed cost that is part of the average total cost, not marginal cost. The correct option is b. false
Step-by-step explanation:
The student asked whether the average total cost exceeds the average variable costs by the value of marginal cost. This statement is false.
Average total cost (ATC) is comprised of average variable cost (AVC) plus average fixed cost (AFC). Marginal cost (MC) is the additional cost of producing one more unit of output and does not determine the difference between ATC and AVC. Rather, ATC goes below MC when ATC is at its minimum.
In other words, MC intersects with both the ATC and AVC at their lowest points. Therefore, it is the average fixed cost that, when added to the AVC, equals ATC at all levels of output, not the MC. The correct option is b. false