Question

“Under normal circumstances, the average total cost of a good equals its marginal cost when the...

“Under normal circumstances, the average total cost of a good equals its marginal cost when the latter is at its minimum.

The average total cost curves and marginal cost curves are inverted U-shaped.”

Do you agree with above statements?

Explain with relevant diagram(s).         

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Answer #1

In both the markets, we can see that, marginal cost curve cuts the ATC at the minimum point. Here the statement states that MC & ATC intersects each other when MC is minimum. Hence the statement is wrong.
This can shown as follows:

Average total cost curve is of U shaped and MC curve is also U shaped. But in case of MC, only the upward rising portion is relevant to take any decision. Hence the statement is false.
The shapes are as follows:
(Average Cost Curve)
(Marginal Cost Curve) Only the upward rising portion is considered.

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