Question

Which of the following statements is correct? a. For most producers, the average total cost curve never crosses the marginal cost curve. b. The average fixed cost curve must eventually rise. c. The average total cost curve first rises, then falls with increased output. d. The marginal cost curve eventually rises with the quantity of output.

Answer 1

The marginal cost curve eventually rises with the quantity of output.

Step-by-step explanation:

The marginal cost is the extra cost incurred with production of an extra unit of a product.

When a business is producing at the initial stage marginal cost is low and profit is being made.

Following the law of diminishing returns, the more quantity that is being produced over time the less the returns. The marginal cost keeps rising and the business starts to make loses as output increases.

So an equilibrium point need to be determined, and production kept below that level in order to make profit.