Which of the following statements is correct?
A)When the marginal cost curve is above the average cost curve, the average cost curve must be rising.(True Answer
)Correct
B)When the marginal cost curve is below the average cost curve, the average cost curve must be rising.
C)When MR = MC, the average cost curve is at its minimum point.
D)When MR = P, the average cost curve is at its minimum point.

Question

Quizplus · Accepted Answer

When the marginal cost curve is above the average cost curve, it means that each additional unit is costing more than the average cost of producing all units. This will increase the average cost curve. So, statement A is correct. Statement B is incorrect because if the marginal cost curve is below the average cost curve, it means that each additional unit is costing less than the average cost of producing all units. This will decrease the average cost curve. Statement C is partially correct, as the minimum point of the average cost curve does indeed occur when MR=MC. However, it is not always the case, as there are exceptions like in the case of a natural monopoly. Statement D is incorrect because the minimum point of the average cost curve occurs where MR=MC, not where MR=P.

Which of the Following Statements Is Correct