Question

Thw shortterm cost can be represented as a function of the level output y: c(y) = c_v(y) + c_f, where c_v(y) represents the variable costs and c_f represents the fixed costs. The average costs function is equal to the sum of the average variables cost and the average variables cost amd the aveage fixed cost:

Show that the marginal cost curve, which is d_c(y)/dy, intersects the average cost curve at the average cost curve's minimum, as shown in the following figure

Answer 1

Marginal cost curve I.e. MC intersects the average variable cost (AVC) as well as average total cost (ATC) curves at their corresponding minimum points. After the amount of the marginal cost which is added to total cost is less than the current average total cost, ATC falls. On the contrary when the marginal cost goes beyond ATC, Average total cost rises. We can infer that as long as MC lies beneath ATC, Average total cost falls, besides each time MC lies above ATC, Average total cost rises. Consequently, at the point of crossing where MC equals ATC, average total cost finishes to fall nevertheless has not however begun to rise. By description this is the minimum point on the ATC curve. At the ATC curve’s minimum point the marginal cost curve intersects the average total cost curve.