If the marginal cost curve intersects the average variable cost curve at 1,000 units per day,the rate of output at which average total cost is minimized is _____.
A)1,000 units
B)more than 1,000 units
C)less than 500 units
D)500 units

Question

Quizplus · Accepted Answer

The average total cost (ATC) is minimized where the marginal cost (MC) curve intersects the ATC curve, not the average variable cost (AVC) curve. Since MC intersects AVC at its lowest point, and ATC includes both AVC and average fixed cost (AFC), which decreases as output increases, the ATC is minimized at a rate of output greater than where MC intersects AVC.

If the Marginal Cost Curve Intersects the Average Variable Cost