If average productivity falls, will marginal cost necessarily rise? How about average cost?
A. If average productivity is falling, average cost must be falling; if marginal productivity is falling, marginal cost must be falling. But there is no necessary relationship between average productivity and marginal cost.
B. If average productivity is falling, average cost must be rising; if marginal productivity is falling, marginal cost must be rising. But there is no necessary relationship between average productivity and marginal cost.
C. If average productivity is falling, both average and marginal costs must be falling; if marginal productivity is falling, both average and marginal costs must be falling as well. In other words, saying that average productivity and marginal productivity are falling has the same repercussions for costs.
D. If average productivity is falling, both average and marginal costs must be rising; if marginal productivity is falling, both average and marginal costs must be rising as well. In other words, saying that average productivity and marginal productivity are falling has the same repercussions for costs.
Ans: B. If average productivity is falling, average cost must be rising; if marginal productivity is falling, marginal cost must be rising. But there is no necessary relationship between average productivity and marginal cost.
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