-Refer to the diagram above. Based on the information illustrated in the graph, which of the following is correct?
A) producing a marginal unit is reducing average costs overall
B) the marginal cost of production for producing an additional unit is below the cost for producing the earlier units
C) the transition point between where MC is pulling down and pulling up AC always occurs at the minimum point of the AC curve
D) low marginal costs first pull up the overall average costs

Question

-Refer to the diagram above. Based on the information illustrated in the graph, which of the following is correct?
A) producing a marginal unit is reducing average costs overall 
B) the marginal cost of production for producing an additional unit is below the cost for producing the earlier units 
C) the transition point between where MC is pulling down and pulling up AC always occurs at the minimum point of the AC curve 
D) low marginal costs first pull up the overall average costs

Quizplus · Accepted Answer

The transition point where the Marginal Cost (MC) curve intersects the Average Cost (AC) curve always occurs at the minimum point of the AC curve. This is because when MC is below AC, it pulls the AC down, and when MC is above AC, it pushes the AC up. The point of intersection, therefore, represents the minimum AC.

-Refer to the Diagram Above