In the graph, at 3 units of output, MC is ₹16 and AVC is ₹22. What is happening to AVC? Short-run cost curves from the schedule. MC is 30, 20, 16, 14, 20, 32, 50 for the 1st to 7th unit, lowest at 14 for the 4th. AVC is 30, 25, 22, 20, 20, 22, 26, lowest at 20 for 4 and 5 units. AC (from 2 units) is 55, 42, 35, 32, 32, 34.57, lowest at 32 for 5 and 6 units. AFC falls from 30 at 2 units to 8.57 at 7. MC meets AVC at P (5 units, ₹20) and AC at Q (6 units, ₹32).

In the graph, at 3 units of output, MC is…

In the graph, at 3 units of output, MC is ₹16 and AVC is ₹22.

Question 57

HardOriginal question

In the graph, at 3 units of output, MC is ₹16 and AVC is ₹22. What is happening to AVC?

Short-run cost curves from the schedule. MC is 30, 20, 16, 14, 20, 32, 50 for the 1st to 7th unit, lowest at 14 for the 4th. AVC is 30, 25, 22, 20, 20, 22, 26, lowest at 20 for 4 and 5 units. AC (from 2 units) is 55, 42, 35, 32, 32, 34.57, lowest at 32 for 5 and 6 units. AFC falls from 30 at 2 units to 8.57 at 7. MC meets AVC at P (5 units, ₹20) and AC at Q (6 units, ₹32).

It is rising, because MC is positiveCorrect answerYour answerIt is at its minimumCorrect answerYour answerIt is falling, because MC is below itCorrect answerYour answerIt equals AFCCorrect answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer C

Correct answer: C

The 3rd unit costs ₹16, less than the ₹25 average so far, so the average falls to ₹22.
Whenever MC is below an average, that average is falling.

Concept: MC below AVC
Typical timeTypical: 100 s
Your timeYours: —

The rule this testsThe shapes of the cost curves

Practise this chapter →

Ten questions from Cost Curves, at your own pace.

Practise this chapter →

Ten questions from Cost Curves, at your own pace.

In the graph, at 3 units of output, MC is ₹16 and AVC is ₹22.

Question 57

Explanation