Figure 8.4.2
-Refer to Figure 8.4.2 above. When average variable cost (AVC) is minimum,
A) profit is maximized.
B) AVC = MC.
C) AVC = ATC.
D) the firm suffers a loss.

Question

Figure 8.4.2
-Refer to Figure 8.4.2 above. When average variable cost (AVC) is minimum,
A) profit is maximized. 
B) AVC = MC. 
C) AVC = ATC. 
D) the firm suffers a loss.

Quizplus · Accepted Answer

When AVC is minimum, it intersects with MC. This is the point where the firm is producing output at the lowest possible cost. Therefore, AVC = MC is the best choice. Profit maximization occurs when MC = MR, but this information is not provided in the graph. AVC = ATC is not relevant in determining cost or profit at this specific point. The graph does not provide enough information to determine if the firm is making a profit or suffering a loss, so option D cannot be chosen.

Figure 8.4.2 -Refer to Figure 8.4.2 Above. When Average Variable Cost (AVC)