Which of the following statements is correct?
A)Average variable cost intersects marginal cost at the latter's minimum point.
B)Marginal cost intersects average cost at the latter's minimum point.
C)Average fixed cost intersects marginal cost at the latter's minimum point.
D)Marginal cost intersects average fixed cost at the latter's minimum point.
E)Average variable cost intersects average fixed cost at the latter's minimum point

Question

Quizplus · Accepted Answer

According to the fundamental rule of profit maximization, a firm should produce at a level where MC = MR (marginal cost equals marginal revenue). When MC is below AC, the cost of producing an additional unit of output is less than the average cost of all units produced so far, which causes AC to decrease. Therefore, MC intersects AC at the latter's minimum point. As a result, choice B is the correct option.

Which of the Following Statements Is Correct