Marginal cost

Question

Marginal cost

Quizplus · Accepted Answer

Marginal cost cuts both average variable cost and average total cost at their lowest point. This is because when marginal cost is below average total cost, it drags the average total cost down; when it is above the average total cost, it pulls the average total cost up. The same logic applies to average variable cost, since it is a component of average total cost. Therefore, the optimal level of production occurs where marginal cost equals both average variable cost and average total cost at their lowest points.

Marginal Cost