Average total costs are minimized when
A) marginal costs begin to increase.
B) marginal costs begin to decrease.
C) marginal cost is greater than average total cost.
D) marginal cost equals average total cost.

Question

Quizplus · Accepted Answer

When marginal cost equals average total cost, the average total cost curve is at its minimum. This is because if marginal cost is below average total cost, it will pull the average down, and if marginal cost is above average total cost, it will push the average up. Therefore, minimizing average total cost requires that marginal cost is equal to average total cost.

Average Total Costs Are Minimized When