A supervisor was given a report which contains the graph of his company's average total cost,...

A supervisor was given a report which contains the graph of his company's average total cost, average variable cost, average fixed cost and the marginal cost curve curves. The intern who wrote the report forgot to label the graphs but did the graph correctly and put all the costs on one graph with cost in dollars on the vertical axis and the quantity of output on the horizontal axis. A supervisor who learned his/her costs curves properly in college microeconomics would know that the firm's marginal cost curve is the curve which:

A. decreases as the quantity of output increases

B. crosses the average fixed cost curve at its minimum point

C. lies above the average variable cost curve

D. crosses both the average total cost curve and the average variable cost curve at their minimum points

Solutions

Expert Solution

Answer - Option D

Crosses both the average total cost curve and the average variable cost curve at their minimum points.

It is the property of the MC curve that it intersects the ATC and the AVC curves at their minimum points.

All the other options do not signify the correct property and the correct relationship between the MC and the other cost curves.

Rahul Sunny answered 2 years ago

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