Identify the correct sequence to establish the relation between marginal cost and average cost.

(A) When Marginal cost falls, average cost also falls.
(B) Marginal cost rises but average cost continues to fall.
(C) Marginal cost is equal to average cost.
(D) Marginal cost rises and average cost also rises.

Choose the correct answer from the options given below:

(A), (B), (C), (D)

The correct answer is Option (1) → (A), (B), (C), (D)

• (A) When Marginal cost falls, average cost also falls. ($\text{MC}$ curve is below the $\text{AC}$ curve on its falling portion.)

• (B) Marginal cost rises but average cost continues to fall. (This happens after $\text{MC}$ has bottomed out but is still less than $\text{AC}$, causing $\text{AC}$ to continue falling until it reaches its minimum.)

• (C) Marginal cost is equal to average cost. (The $\text{MC}$ curve intersects the $\text{AC}$ curve at the minimum point of $\text{AC}$.)

• (D) Marginal cost rises and average cost also rises. (The $\text{MC}$ curve is now above the $\text{AC}$ curve, pulling $\text{AC}$ up.)