Figuring Out ATC from given values?

Question

When Better Beds produces 40 beds per day, its average variable cost is $600, its average total cost is $800, and its marginal cost is $700.

9.2. Now consider average total cost. When Better Beds increased production from 39 to 40 beds per day:

A. Average total cost fell.

B. Average total cost rose.

C. Average total cost remained at $800 per day.

D. There is no way to know how average total cost changed.

Answer 1

A. Average total cost fell.

Check cost graph and it should become obvious:

ATC>MC>AVC - ATC is falling in this range until ATC=MC

800 > 700 > 600

MC and AVC both are rising.