If marginal cost is equal to average total cost, then:
A) average total cost is increasing.
B) average total cost is at its maximum.
C) average total cost is at its minimum.
D) marginal cost is increasing.

Question

Quizplus · Accepted Answer

When marginal cost is equal to average total cost, it means that the last unit produced has the same cost as the average of all units produced so far. At this point, the average total cost is at its minimum. This is because as long as marginal cost is below average total cost, producing another unit will decrease the average total cost. Once marginal cost exceeds average total cost, producing another unit will increase the average total cost. Therefore, the point where marginal cost equals average total cost is the minimum point of the average total cost curve.

If Marginal Cost Is Equal to Average Total Cost, Then