Yes. Average total cost will be falling if marginal cost is lower than average total cost.
Do marginal costs have an impact on average total costs?
- When the marginal cost of production is lower than the average cost of creating earlier units, as it is in the locations to the left of where MC crosses ATC, generating one more extra unit will lower average costs overall, causing the ATC curve to slant downward in this region.
- Average total cost will decrease when marginal cost is lower than average total cost, whereas average total cost will increase when marginal cost is higher than average total cost. Average total cost (ATC) = marginal cost, where ATC = marginal cost is where a firm is most productively effective (MC).
- Average total cost will be falling if marginal cost is lower than average total cost.
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