Why is it possible for average cost to be decreasing while marginal cost is increasing?

Average cost can be decreasing while marginal cost is increasing due to the effect of scale. When a firm produces more output, the average cost may decline as fixed costs are spread over a larger number of units, leading to economies of scale. However, marginal cost can increase if the firm experiences diminishing returns, where adding more inputs leads to less efficient production. Thus, while each additional unit may cost more to produce, the overall average cost can still decrease if the increase in output sufficiently offsets the rising marginal costs.