As long as average cost is falling

Option 1: Marginal cost > Average cost -> This would cause average cost to rise, not fall.

Option 2: Marginal cost < Average cost -> This causes average cost to fall.

Option 3: Marginal cost = Average cost -> This occurs at the minimum point of average cost where it is neither rising nor falling.

Option 4: Marginal cost = Total cost -> This is not a standard economic relationship and doesn't relate to falling average cost.

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Hence, **Option 2: Marginal cost < Average cost** -> When the cost of producing an additional unit (marginal cost) is less than the average cost per unit, it pulls the average down. This is similar to how adding a test score below your current average reduces your overall average. The marginal cost curve intersects the average cost curve at the minimum point of AC; before this point (when AC is falling), MC < AC. -> correct