Answer
c. average total cost would decrease.
Work Step by Step
Original quantity = 20
New quantity = 21
Therefore, we see one additional unit of output has been added to the total quantity.
Original Average Total Cost (ATC) = 25 dollars.
Original Marginal Cost (MC) = 15 dollars.
What can we predict?
Well, we know that whenever the MC is less that the ATC, the ATC is falling; and whenever the MC is greater than ATC, the ATC is rising.
Here,
MC > ATC; ie 15 > 25.
Hence, we can predict that the ATC will fall.