Question

Which of the following curves cuts which curve at its minimum point?

• A. Marginal cost curve cuts Total cost curve
• B. Marginal cost curve cuts Average cost curve
• C. Marginal cost curve cuts Fixed cost curve
• D. None of these

Hint:

The marginal cost curve cuts the average cost curve at its minimum point, indicating the most efficient level of production.

Answer 1

The Correct Option is B

Step 1: Understanding the cost curves.
The marginal cost (MC) curve represents the additional cost incurred from producing one more unit of output. It is a key curve in understanding the production process. The average cost (AC) curve, on the other hand, represents the total cost per unit of output. The MC curve cuts the AC curve at its minimum point, which indicates the point of optimal production where the firm is most efficient in terms of cost per unit produced.

Step 2: Analyzing the options.
(A) Marginal cost curve cuts Total cost curve: This is incorrect. The MC curve does not cut the Total cost (TC) curve at its minimum point. Total cost does not have a minimum point.
(B) Marginal cost curve cuts Average cost curve: Correct. The MC curve cuts the AC curve at its minimum point. This is a key relationship in cost theory.
(C) Marginal cost curve cuts Fixed cost curve: This is incorrect. The FC curve is horizontal and does not have a minimum or maximum point. It does not intersect with the MC curve in this way.
(D) None of these: This is incorrect, as the correct answer is (B).

Step 3: Conclusion.
The marginal cost curve cuts the average cost curve at its minimum point. Therefore, the correct answer is (B) Marginal cost curve cuts Average cost curve.