Question

At which point does marginal cost curve cut the average cost curve?

• A. At highest point
• B. At lowest point
• C. At mid-point
• D. None of these

Hint:

The marginal cost curve cuts the average cost curve at its lowest point, indicating the minimum average cost.

Answer 1

The Correct Option is B

Step 1: Understanding marginal and average cost.
The marginal cost curve represents the additional cost of producing one more unit of output, while the average cost curve shows the total cost per unit of output. The marginal cost curve intersects the average cost curve at the point where average cost is at its minimum. This is because when marginal cost is below average cost, it pulls the average cost down, and when marginal cost is above average cost, it pushes the average cost up.

Step 2: Analyzing the options.
(A) At highest point: This is incorrect. The marginal cost curve does not intersect the average cost curve at its highest point.
(B) At lowest point: Correct. The marginal cost curve intersects the average cost curve at its lowest point, where the average cost is minimized.
(C) At mid-point: This is incorrect. The marginal cost curve does not intersect the average cost curve at the mid-point.
(D) None of these: This is incorrect, as option (B) is the correct answer.

Step 3: Conclusion.
The correct answer is (B) At lowest point, as this is where the marginal cost curve intersects the average cost curve.