When the average variable cost curve is "u-shaped" and not everywhere upward or downward sloping, marginal cost will:
A)never intersect the average variable cost curve.
B)never equal marginal revenue.
C)intersect or "bisect" the average variable cost curve at its minimum.
D)always be increasing.

Question

Quizplus · Accepted Answer

When the average variable cost curve is "u-shaped", the marginal cost curve intersects or "bisects" the average variable cost curve at its minimum point. This is because at the minimum point, the average variable cost curve is at its lowest point, which means that each additional unit produced has a lower average variable cost. As marginal cost reflects the cost of producing one additional unit, it will also be at its minimum point where it intersects the average variable cost curve. Therefore, choice C is the correct answer. When the average variable cost curve is "U-shaped," it reaches a minimum point. At that minimum point, the marginal cost curve intersects or "bisects" the average variable cost curve. Therefore, choice C is correct. Choices A, B, and D are incorrect. Since marginal cost must always intersect the average variable cost curve at its minimum in this case, it is not true that it will never intersect the average variable cost curve. Similarly, since marginal revenue can intersect the marginal cost curve at any point, it is not true that it will never equal marginal revenue. Finally, although the marginal cost curve could be increasing or decreasing, it is not necessarily always increasing.

When the Average Variable Cost Curve Is "U-Shaped" and Not