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Economics (AS & A Level) · May / June 2023 · Paper 31 · Question 7

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

A firm at its current level of production finds that its short-run marginal cost is less than its short-run average variable cost. Which conclusion about the firm can be drawn from this information?

  1. AAverage variable cost is constant.
  2. BAverage variable cost is falling.
  3. CAverage variable cost is greater than its average total cost.
  4. DAverage variable cost is rising.

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Correct answer: B. Average variable cost is falling.

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