Discussion
Marginal Cost is less than the Average Cost when Average Cost falls with
Answer: A
When average cost is falling, marginal cost is below it: each extra unit adds less to total cost than the existing average, which pulls the average down. So marginal cost is less than average cost when average cost falls with an increase in output. When output decreases, the average cost behaviour depends on the other side of the curve, and at constant output or no change there is no movement along the curve. Marginal cost cuts average cost from below at its minimum point. The marginal cost curve cuts the average cost curve at the lowest point of the latter, and beyond that point marginal cost is above average cost.
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