Question

Which of the following statements is correct?

rev: 06_26_2018

Multiple Choice

• The marginal cost curve intersects the average variable cost curve at its lowest point.

• If average variable cost is increasing, then average total cost must be increasing too.

• The marginal cost curve intersects the average variable cost curve at a level of output greater than where the marginal cost curve intersects the average total cost curve.

• Marginal cost is the change in the average fixed cost associated with a change in output of one unit.

Answer 1

The marginal cost curve intersects the average variable cost curve at its lowest point. : TRUE

(When MC is above AVC, MC is pushing the average up; therefore MC and AVC intersect at the lowest AVC.)

If average variable cost is increasing, then average total cost must be increasing too. : TRUE

( ATC = AFC + AVC )

The marginal cost curve intersects the average variable cost curve at a level of output greater than where the marginal cost curve intersects the average total cost curve. : FALSE ( The opposite happens because AVC is lower than ATC )

Marginal cost is the change in the average fixed cost associated with a change in output of one unit.: FALSE ( It is change in change in Total Cost )