If both average cost (AC) and marginal cost (MC) are U shaped, then
A) AC will reach a minimum at a level of output that is less than that at which MC reaches a minimum.
B) the total cost curve will be a straight line.
C) AC will reach a minimum at a level of output that is greater than that at which MC reaches a minimum.
D) both AC and MC will reach a minimum at the same level of output.

Question

Quizplus · Accepted Answer

Marginal cost (MC) intersects the average cost (AC) at its minimum point. When MC is below AC, AC is decreasing. When MC is above AC, AC is increasing. Therefore, AC reaches its minimum at a higher level of output than MC does, because MC starts to rise before AC reaches its minimum, pulling the average up.

If Both Average Cost (AC) and Marginal Cost (MC) Are