Economics 12th Edition by William Baumol, Alan S Blinder

Exercise 7

We indicated in this chapter that the MC curve cuts the AVC (average variable cost) curve at the minimum point of the latter. Explain why this must be so. ( Hint: Because marginal costs are, by definition, entirely composed of variable costs, the MC curve can be considered the curve of marginal variable costs. Apply the general relationships between marginals and averages explained in the appendix to Chapter 8.)