Question

# When marginal cost equals average total cost, ________.

A
average total cost is falling
B
average total cost is rising
C
average total cost is maximised
D
average total cost is minimized

Solution

## The correct option is D average total cost is minimizedWhen the MC curve is lower than the AC curve, ie the MC $$\le$$ AC the average cost will tend to fall as if you take a lower number and add it to the average and then take a new average, the new average has to be lower. At some point the MC will stop falling and begin rising to a point where it will meet the AC curve. Thus only when the MC $$\ge$$ AC will the AC curve begin to rise as now a higher number is being added, and the new average must be higher.  Thus the point that the MC meets the AC curve, has to be its minimum point.Economics

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