A firm uses labor as an input in production.In the short-run,its average cost will reach a minimum where:
A)average product of labor reaches a maximum.
B)marginal product of labor reaches a maximum.
C)marginal cost begins to increase.
D)marginal cost equals average cost.

Question

Quizplus · Accepted Answer

In the short-run, average cost reaches a minimum where marginal cost equals average cost. This is because when marginal cost is below average cost, it pulls the average down, and when it is above, it pushes the average up. The point where they are equal is the minimum point of the average cost curve.

A Firm Uses Labor as an Input in Production