When average cost is "u-shaped" (neither always rising or always falling), the marginal cost curve will
A) cross through (intersect) the average cost curve at its maximum.
B) not intersect with the average cost curve at all.
C) be a fixed distance above the average cost curve.
D) cross through (intersect) the average cost curve at its minimum.

Question

Quizplus · Accepted Answer

When the average cost curve is U-shaped, the marginal cost curve will intersect the average cost curve at its minimum. This is because when the marginal cost is below the average cost, the average cost will be falling. When the marginal cost is above the average cost, the average cost will be rising. Therefore, the intersection point will occur where the marginal cost curve crosses the average cost curve at the lowest point of the U-shape.

When Average Cost Is "U-Shaped" (Neither Always Rising or Always