Suppose that your firm\'s marginal cost of producing a pencil is 5 cents and the average cost of producing a pencil is 3 cents. If your firm is interested in minimizing average total costs, what should your firm do? A) Maintain production at the current level. B) Look for ways to increase fixed costs. C) Decrease production. D) Increase production. Solution D) Increase production..

1. Suppose that your firm's marginal cost of producing a pencil is 5 cents and the average cost of
producing a pencil is 3 cents. If your firm is interested in minimizing average total costs, what
should your firm do?
A) Maintain production at the current level.
B) Look for ways to increase fixed costs.
C) Decrease production.
D) Increase production.
Solution
D) Increase production.