Carefully explain if the following statements are true, false, or uncertain

a. If average cost is increasing, marginal cost must be increasing.
b. If there are diminishing returns, the marginal cost curve must be positively sloped.
c. Marginal costs decrease as output increases because the firm can spread fixed costs over more units.


a. True. If average cost is increasing, marginal cost must be above average cost, so marginal cost must be increasing.
b. True. If there are diminishing returns, each worker produces less than the one before him. Thus each unit must be getting more expensive (because you pay workers the same amount but they produce less).
c. False. Marginal costs have nothing to do with fixed costs. The statement would be correct if it was about average costs.

Economics

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Economics