Costs, definitions, marginal cost
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Explain if the following statements are true, false, or uncertain
a. If average cost is increasing, marginal cost must be increasing
b. If there are diminishing returns, the marginal cost curve must be positively sloped
c. Marginal costs decrease as output increases because the firm can spread fixed costs over more units
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Solution Summary
Costs, definitions, and marginal costs are evaluated as true or false.
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a. Uncertain. When average cost is increasing, marginal cost will lie above average cost. However, it may be either falling or increasing. For example if average cost for 10 units is 10 and next unit can be produced at 21, the average cost will increase to 11. If ...
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