According to the cost function C = (w1 + w2 +w1w2), where w1 and w2 are input prices, which of the following statements shows the properties of Average Cost (AC) and Marginal Cost (MC)?
1
AC decreases with an increase in either w1 or w2 and MC is constant regardless of changes in w1 and w2.
2
MC decreases with an increase in either w1 or w2 and AC is constant regardless of changes in w1 and w2.
3
Both AC and MC increase with an increase in either w1 or w2.
4
Both AC and MC decrease with an increase in either w1 or w2.