Question

2. The Marginal Cost curve will

a. cut ATC at the minimum of ATC but cut AVC at a point to the left of the minimum of AVC.

d. cut AVC at the minimum of AVC but cut ATC at a point to the right of the minimum of ATC.

b. cut ATC at the minimum of ATC but cut AVC at a point to the right of the minimum of AVC.

e. cut both ATC and AVC at their respective minimums

c. cut AVC at the minimum of AVC but cut ATC at a point to the left of the minimum of ATC.

Answer 1

Correct option - (e) cut both ATC and AVC at their respective minimums.

As we all know first ATC and AVC curves are downward sloping means both the costs are decreasing as the outout increases. And in the beginning marginal cost is also decreasing. But it is marginal cost start increasing first. Which bring the halt to the downward decrement of ATC and AVC curves. When ATC and AVC curves reach their minimum MC curve cut them from below at their minimum point. After this point MC is more than ATC and AVC which forces both ATC and AVC to go up and now they become upward sloping.