If a producer (who has no impact on prices) is correctly profit maximizing and m

Question

If a producer (who has no impact on prices) is correctly profit maximizing and making a profit, what must be true about average vs marginal cost at the current quantity being produced?

A. Marginal cost must be higher than average total cost.
B. Marginal cost must be lower than average total cost.
C. Marginal cost must equal average total cost.
D. Marginal cost is increasing, but average variable cost is decreasing.
E. We can’t say anything about the relationship between marginal and average costs without more information.

Explanation / Answer

The correct answer is option A. The marginal cost is higher than average total cost.

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