State giving reasons, whether the following statements are true or false:
(i) Average Variable Cost falls even when Marginal Cost is rising.
(ii) The difference between Total Cost and Total Variable Cost falls with increase in output.
(iii) As soon as Marginal Cost starts rising, Average Variable Cost also starts rising.
(iv) Average Cost falls only when Marginal Cost falls.
(v) The difference between Average Total Cost and Average Variable Cost is. constant.
(vi) 4s output is increased, the difference between Average Total Cost and Average Variable Cost falls and ultimately becomes zero.
True, Average Variable Cost can fall even when Marginal Cost is rising. As minimum point of MC lies to the left of AVC.
(ii) False, because the difference between Total Cost and Total Variable Cost is equal to Total Fixed Cost which remains constant at all levels of output.
(iii) False, Average Variable Cost can fall even when Marginal Cost is rising.
(iv) False, Average Cost can fall even when Marginal Cost is rising.
(v) False, the difference between AVC and ATC is AFC which can never be constant. Since, AFC tends to decline with increase in output, the difference between ATC and AVC must reduce as output increases.
(vi) False, because as output increases, the difference between ATC and AVC falls but can never be zero. The difference is equal to AFC, which must remain positive, even when it is falling.