When marginal cost equals average total cost, ________.
average total cost is falling
average total cost is rising
average total cost is maximised
average total cost is minimized
The correct option is D average total cost is minimized
When 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.