Read the passage carefully and answer the questions based on the passage:

Shapes of the Long Run Cost Curves

It is argued that in a typical firm IRS is observed at the initial level of production. This is then followed by the CRS and then by the DRS. LRAC curve downward sloping part corresponds to IRS and upward rising part corresponds to DRS. At the minimum point of the LRAC curve, CRS is observed. For the first unit of output, both LRMC and LRAC are the same. Then, as output increases, LRAC initially falls, and then, after a certain point, it rises. As long as average cost is falling, marginal cost must be less than the average cost. When the average cost is rising, marginal cost must be greater than the average cost. LRMC curve cuts the LRAC curve from below at the minimum point of the LRAC.

When the average cost is rising, then.

Marginal cost > Average cost

The correct answer is Option (4) → Marginal cost > Average cost

In the long run (as in the short run), the relationship between Average Cost (AC) and Marginal Cost (MC) follows a clear pattern:

• When MC < AC, the AC curve falls.

• When MC = AC, the AC curve is at its minimum point.

• When MC > AC, the AC curve rises.

Thus, when the average cost is rising, it means the marginal cost lies above the average cost, i.e., MC > AC.