Average total cost is increasing whenever:

• A. marginal cost is greater than average total cost
• B. total fixed cost is increasing
• C. average variable cost is constant
• D. marginal cost is less than average total cost

Answer: (A)

Verified step by step guidance

1. Recall the relationship between Marginal Cost (MC) and Average Total Cost (ATC): when MC is less than ATC, ATC is decreasing; when MC is greater than ATC, ATC is increasing.
2. Understand that Average Total Cost (ATC) is the sum of Average Variable Cost (AVC) and Average Fixed Cost (AFC), and that total fixed cost does not change with output, so it cannot cause ATC to increase by itself.
3. Recognize that if Average Variable Cost (AVC) is constant, it means AVC is not changing, so changes in ATC depend on the relationship between MC and ATC.
4. Use the concept that Marginal Cost represents the cost of producing one more unit, so if MC is above ATC, producing an additional unit raises the average total cost, causing ATC to increase.
5. Conclude that the condition for ATC to be increasing is when Marginal Cost (MC) is greater than Average Total Cost (ATC).