Questions: 098.13.MANK09 Average total cost is increasing whenever a. marginal cost is greater than average total cost. b. total cost is increasing. c. marginal cost is less than average total cost. d. marginal cost is increasing. O- Icon Key 098.13.MANK09

The answer is the first one (a): marginal cost is greater than average total cost.

Explanation for each option: a. Marginal cost is greater than average total cost: This is correct. When marginal cost (MC) is greater than average total cost (ATC), it means that the cost of producing an additional unit is higher than the average cost of producing all previous units. This will pull the average total cost up, causing it to increase.

b. Total cost is increasing: This is incorrect. Total cost (TC) can be increasing even when average total cost is decreasing. For example, if the firm is experiencing economies of scale, the total cost increases as output increases, but the average total cost decreases.

c. Marginal cost is less than average total cost: This is incorrect. When marginal cost is less than average total cost, it means that the cost of producing an additional unit is lower than the average cost of producing all previous units. This will pull the average total cost down, causing it to decrease.

d. Marginal cost is increasing: This is incorrect. Marginal cost increasing does not necessarily mean that average total cost is increasing. Average total cost will only increase if marginal cost is greater than average total cost.

Summary: The average total cost is increasing whenever the marginal cost is greater than the average total cost.