Question

The marginal cost curve cuts the average variable cost curve at which point?

• A. Highest point
• B. Minimum point
• C. In declining portion
• D. In rising portion

Hint:

The marginal cost curve intersects the average variable cost curve at the minimum point of the AVC curve.

Answer 1

The Correct Option is B

Step 1: Understanding marginal cost and average variable cost.
The marginal cost (MC) curve represents the additional cost of producing one more unit of output, while the average variable cost (AVC) curve represents the variable cost per unit of output. The marginal cost curve intersects the average variable cost curve at its minimum point. This is because when marginal cost is less than average variable cost, AVC is decreasing; when marginal cost is greater than AVC, AVC is increasing.

Step 2: Analyzing the options.
(A) Highest point: This is incorrect, as marginal cost cuts AVC at the minimum, not the highest point.
(B) Minimum point: Correct. The MC curve intersects the AVC curve at the minimum point, where AVC is at its lowest.
(C) In declining portion: This is incorrect, as the MC curve cuts AVC after the AVC curve starts rising.
(D) In rising portion: This is incorrect because the MC curve cuts the AVC curve before it starts rising.

Step 3: Conclusion.
The correct answer is (B) Minimum point, as the marginal cost curve intersects the average variable cost curve at its minimum point.