Question

In: Economics

Which statement is correct? Select one: a. When MR = P, the average cost curve is...

Which statement is correct?

Select one:

a. When MR = P, the average cost curve is at its minimum point.

b. When MR = MC, the average cost curve is at its minimum point.

c. When the marginal cost curve is below the average cost curve, the average cost curve must be rising.

d. When the marginal cost curve is above the average cost curve, the average cost curve must be rising.

Solutions

Expert Solution

Option d.

When the marginal cost curve is above the average cost curve, the average cost curve must be rising.

An MC is a change in total cost because of one more unit of output. Average total cost is total cost divided by output so the ATC is decreasing when MC is below it and increasing when MC is above it and the ATC is minimum at MC=ATC.


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