Chapter 10R, Problem 10MCQ

To determine

The effect of marginal cost on the total cost.

Answer to Problem 10MCQ

(c) increasing at an increasing rate.

Explanation of Solution

When the marginal cost is rising, the total cost increases at an increased rate. It is because the producer incurs higher costs of acquiring an additional quantity of the variable input. Hence, option (c) is correct.

Option (a) is incorrect because, for the total cost to decrease at an increasing rate, marginal cost should be decreasing at an increasing rate.

Option (b) is incorrect because, for a total cost to decrease at a decreasing rate, marginal cost should be decreased at decreasing rate.

Option (d) is incorrect because for total cost increasing at a decreasing rate, marginal cost should be positive and declining.

Option (e) is incorrect because for total cost increasing at a constant rate, marginal cost should be constant.

Economics Concept Introduction

Introduction:

Marginal cost is the addition to the total cost due to increasing the use of one additional unit of the variable input. Total costs are the overall costs of fixed and variable inputs.

Marginal cost can be derived from the given formula,

MC = ΔTC/ΔQ

Where MC is marginal cost, TC is total costs and Q is the quantity of the output.