In the short term, increasing production is:____.
a) always beneficial because average total cost eventually falls
b) not always beneficial because marginal cost eventually falls
c) not always beneficial because average total cost eventually increase faster
d) always beneficial because marginal cost is constant
2) If a firms average total cost is increasing, the:_.
a) marginal cost must be lower than average total cost
b) marginal cost must be lower than total cost
c) marginal cost must be higher than averags total cost
d) marginal cost must be higher than total cost
3) In the short term, as production reaches high levels:________.
a) all costs increase
b) all costs increase except marginal cost
c) all costs increase except average fixed cost

1. In short run, when more & more variable factors are employed on a fixed factor - Total cost first increase at decreasing rate, then at increasing rate. So, Average Total cost first decreases, & then increases (keeps on increasing faster with increase in production).

2. Marginal Cost, Average Total Cost relationship - MC > ATC, AC rises. MC < ATC, ATC falls & MC = ATC, ATC is minimum. So, ATC is increasing when MC is higher than ATC

3. Due to Law of Diminishing Productivity (as explained in 1), higher production implies rise in all costs - TVC, AVC, MC, ATC. But Average Fixed Cost = Total Fixed Cost (constant) / Output (increasing) falls.