Economics (AS & A Level) · Oct / Nov 2021 · Paper 33 · Question 8

9708Types of cost, revenue and profit, short-run and long-run production

A perfectly competitive firm is producing a level of output where average cost is lower than marginal cost. What are the effects on these costs if output increases by one unit?

Aaverage cost: falls; marginal cost: falls
Baverage cost: falls; marginal cost: rises
Caverage cost: rises; marginal cost: falls
Daverage cost: rises; marginal cost: rises

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Correct answer: D. average cost: rises; marginal cost: rises

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