Question

State whether the following statements are true or false. Give reasons for your answer: 

As soon as marginal cost starts rising, average variable cost also starts rising. 

Answer 1

False, as soon as Marginal Cost (MC) starts rising, Average Variable Cost (AVC) does not start rising. This is because MC falls faster than AVC, attains its minimum and thereafter starts rising. There is a region, where, MC rises but AVC continues to fall. Thus, it is not AVC would not start rising up as soon as the MC curve starts rising.