The marginal cost curve can cut the average variable cost curve from below only at its minimum.

Question

Quizplus · Accepted Answer

This statement is true according to the law of diminishing returns. The point at which the marginal cost curve cuts the average variable cost curve from below represents the point where the marginal cost is equal to the average variable cost, which is at the lowest point of the average variable cost curve. After this point, the average variable cost curve starts to increase due to diminishing returns, while the marginal cost curve continues to increase.

The Marginal Cost Curve Can Cut the Average Variable Cost