What happens to ATC when MC lt ATC ........

Introductory Microeconomics Theory of Production and Cost

What happens to ATC when MC< ATC?

ATC will rise

ATC will fall

ATC will remain constart

None of these

- Option 1: ATC will rise

- If marginal cost (MC) is less than average total cost (ATC), adding another unit of production costs less than the current average.

- This would not cause ATC to rise because the additional cost is bringing the average down.

- Option 2: ATC will fall

- When MC is less than ATC, the average is pulled down by the lower marginal costs.

- This means ATC will decrease as more units are produced.

- This is the correct option.

- Option 3: ATC will remain constant

- ATC staying constant would imply MC equals ATC, not when MC is less than ATC.

- Therefore, it's unlikely for ATC to remain unchanged.

- Option 4: None of these

- This is incorrect given the other options that describe ATC behavior accurately.

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