State whether the following statements are true or false. Give reasons

1.	State whether the following statements are true or false. Give reasons for your answer:(i) Average cost falls only when marginal cost falls.(ii) As output increases the difference between average cost and average variable cost decreases.
Answer» (i) False, Average cost falls only when MC < AC, Average cost can fall even when MC is rising. (ii) True, The difference between AC and AVC is true to AFC. As output increases AFC decreases, so the difference between AC and AVC decreases.

State whether the following statements are true or false. Give reasons for your answer:(i) Average cost falls only when marginal cost falls.(ii) As output increases the difference between average cost and average variable cost decreases.

Answer»

(i) False, Average cost falls only when MC < AC, Average cost can fall even when MC is rising.

(ii) True, The difference between AC and AVC is true to AFC. As output increases AFC decreases, so the difference between AC and AVC decreases.