The relationship between MC and AC can best be described as
A) when AC increases, MC starts to increase.
B) when MC increases, AC starts to increase.
C) when MC decreases, AC decreases.
D) when MC exceeds AC, AC increases.
D
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If the price of walnuts rises, many people would switch from consuming walnuts to consuming pecans. But if the price of salt rises, people would have difficulty purchasing something to use in its place. These examples illustrate the importance of
a. the availability of close substitutes in determining the price elasticity of demand. b. a necessity versus a luxury in determining the price elasticity of demand. c. the definition of a market in determining the price elasticity of demand. d. the time horizon in determining the price elasticity of demand.
"A $1,000 tax paid by a poor person may be a larger sacrifice than a $10,000 tax paid by a wealthy person" is an argument in favor of
a. the horizontal equity principle. b. the benefits principle. c. a regressive tax argument. d. the ability-to-pay principle.