What curve coincides with (equals) a firm’s marginal-cost curve that’s lies just above the firm’s average-variable...

What curve coincides with (equals) a firm’s marginal-cost curve that’s lies just above the firm’s average-variable cost curve? Explain why they coincide.

Expert Solution

There are two cost curves that are coinciding with the marginal cost curve at two different levels of output. Because the shape of the marginal cost curve is similar to alphabet U, the average variable cost curve cuts the marginal cost curve at the minimum of average variable cost. From there on the average variable cost curve slopes upward.

The other curve that coincides with the marginal cost curve is the average total cost curve. Similar to the average variable cost curve, the average total cost curve also cuts the marginal cost curve at the minimum of average total cost. The difference between the average total cost and average variable cost is the average fixed cost and it is the reason why average total cost curve lies above the average variable cost curve.

The two curves coincide because to the left of this meeting point, average cost curve is falling and to the right of this point, it is rising. Hence it touches the marginal cost curve at the minimum level of average total cost.

Rahul Sunny answered 1 year ago

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