Suppose you know that at the current level of production average total cost equals marginal cost, then you know that it is also TRUE that
A) fixed costs are zero.
B) average fixed costs are increasing.
C) average total cost will decrease if production is increased.
D) average total cost is minimized at the current level of output.

Question

Quizplus · Accepted Answer

If average total cost equals marginal cost, then the firm is producing at the minimum efficient scale and therefore producing at the point where average total cost is minimized. Therefore, choice D is the correct answer. Choices A and B have no relation to the given information, and choice C is false since increasing production beyond the minimum efficient scale will lead to an increase in average total cost.

Suppose You Know That at the Current Level of Production