The marginal cost curve:
A) lies always below the average total cost curve (ATC).
B) lies always above the average variable cost curve (AVC).
C) intersects the ATC and AVC at their maximum points.
D) intersects the ATC and AVC at their minimum points.

Question

Quizplus · Accepted Answer

The marginal cost curve intersects the average total cost (ATC) and average variable cost (AVC) curves at their minimum points. This is because at the minimum point, the slope of the ATC and AVC curves are equal to the slope of the MC curve. When MC is below ATC, ATC will decrease; and when MC is above ATC, ATC will increase. Therefore, the minimum point of ATC curve corresponds to the point where MC curve intersects it. Similarly, the minimum point of AVC curve corresponds to the point where MC curve intersects it.

The Marginal Cost Curve