Is the statement "average variable cost rises as output rises if marginal cost exceeds average total cost" true or false? I believe it is true, but I do not understand why.

The statement "average variable cost rises as output rises if marginal cost exceeds average total cost" is true. Average total cost includes both fixed costs and average variable costs, and marginal cost is the average cost of producing one additional unit. Therefore, if the marginal cost is higher than average total cost, then it must mean that the variable costs of production are greater than the sum of the fixed costs and average variable costs previously. Therefore, the average variable cost necessarily must rise if the marginal cost is greater than the average total cost.

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To answer this question properly, you need to understand the different economic and financial terms to which the question alludes, so let's start by defining them.

Average variable cost is the average cost of producing additional units of a product without considering the fixed costs associated with their production, such...

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To answer this question properly, you need to understand the different economic and financial terms to which the question alludes, so let's start by defining them.

Average variable cost is the average cost of producing additional units of a product without considering the fixed costs associated with their production, such as overhead. Marginal cost is an economic term meaning the additional cost of producing one additional unit (for instance, if ten units cost $20 to produce, and eleven units cost $21 to produce total, the marginal cost of the eleventh unit is $1). Finally, average total cost is the overall average cost of producing a product, including fixed costs.

So the statement is saying that when marginal cost is greater than average total cost, the variable cost of producing additional units will go up. If the marginal cost is greater than the average total cost, that means that the marginal cost is greater than the average cost of the components or previous products (that is, it costs more to produce one additional unit of product than the average total cost of each prior product). Since average total cost includes variable costs as well as fixed costs, this means that the marginal cost, or cost to produce the next unit, is greater than the sum of the costs of previous units. Therefore, since average variable cost is the only thing that can change, it means that it must be increasing.

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