If marginal cost is rising in a competitive firm’s short-run production process and its average variable cost is falling as output is increased, then
A. marginal cost is above average variable cost.
B. marginal cost is below average fixed cost.
C. marginal cost is below average variable cost.
D. average fixed cost is constant.
Answer:C
If marginal cost is rising in a competitive firm’s short-run production process and its average variable cost is falling as output is increased, then
A. marginal cost is above average variable cost. B. marginal cost is below average fixed cost. C. marginal cost is below average variable cost. D. average fixed cost is constant.
Explanation: 53. Kate’s 24-Hour Breakfast Diner menu offers one item, a $5.00 breakfast special. Kate’s costs for servers, cooks, electricity, food, etc. average out to $3.95 per meal. Her costs for rent, insurance cleaning supplies and business license average out to $1.25 per meal. Since the market is highly competitive, Kate should