The correct answer is C.
The marginal cost curve is the additional cost incurred by producing one more unit of output. The average variable cost curve is the total variable cost divided by the quantity of output produced.
If a firm’s average variable cost curve is rising, it means that the additional cost of producing one more unit of output is increasing. This can happen for a number of reasons, such as increasing input prices or decreasing productivity.
When the marginal cost curve is above the average variable cost curve, it means that the additional cost of producing one more unit of output is greater than the average variable cost of producing that unit of output. This means that the firm is making a loss on each additional unit of output produced.
The firm will continue to produce output as long as the marginal revenue from selling that output is greater than the marginal cost of producing it. However, if the marginal cost curve is above the average variable cost curve, the firm will eventually reach a point where the marginal revenue is less than the marginal cost. At this point, the firm will stop producing output.
Therefore, if a firm’s average variable cost curve is rising, its marginal cost curve must be above the average variable cost curve.