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Chapter 20: Problem 18

The marginal cost curve intersects __________ at its/their minimum point(s). (LO5) a) the ATC, but not the AVC b) the AVC, but not the ATC c) both the ATC and the AVC d) neither the ATC nor the AVC

Short Answer

Expert verified
The correct answer is (c) both the ATC and the AVC. The marginal cost curve intersects both the average total cost and average variable cost curves at their respective lowest points.

Step by step solution

01

Understanding the concepts

To solve this problem, we must first understand the concepts of marginal cost(MC), average total cost (ATC), and average variable cost (AVC) curves. The marginal cost curve represents the additional cost of producing one more unit of output. The ATC curve shows the average cost per unit produced, considering both fixed and variable costs, while the AVC curve reflects the average cost per unit produced that includes only variable costs, excluding fixed costs.
02

Determining the relationship between curves

Now that we understand these concepts, let's determine which curve(s) the marginal cost curve intersects at its minimum point. When MC is less than AVC and ATC, the latter two costs will be falling. When MC is greater than AVC and ATC, the latter two costs will be rising. Importantly, the marginal cost curve intersects both average total cost and average variable cost curves at their respective lowest points.
03

Selecting the correct answer

With this knowledge, we can now choose the correct option from the multiple choices: a) The marginal cost curve intersects the ATC, but not the AVC (False) b) The marginal cost curve intersects the AVC, but not the ATC (False) c) The marginal cost curve intersects both the ATC and the AVC (True) d) The marginal cost curve intersects neither the ATC nor the AVC (False) So the correct answer is (c) both the ATC and the AVC.

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Most popular questions from this chapter

In general, as output rises you first attain __________ (LO6) a) increasing returns, then diminishing returns, then negative returns b) diminishing returns, then negative returns, then increasing returns c) negative returns, then increasing returns, then diminishing returns d) increasing returns, then negative returns, then diminishing returns

A firm has a fixed cost of \(\$ 100,000\), and variable cost is \(\$ 90,000\) at an output of one. How much is marginal cost at an output of one? (LO2) a) \(\$ 10,000\) b) \(\$ 90,000\) c) \(\$ 100,000\) d) \(\$ 190,000\) e) There is insufficient information to answer the question.

Which of these statements is false? (LO8) a) When the firm shuts down, output is zero. b) When variable cost is zero, output is zero. c) When output is zero, total cost is zero. d) None of these is false.

Average variable cost is found by dividing __________ (LO4) a) variable cost by output b) output by variable cost c) marginal cost by output d) output by marginal cost

When \(\mathrm{MC}\) is rising but still below ATC, then __________ ( LO5) a) ATC is declining b) ATC is constant c) ATC is rising d) there is no way of determining what ATC is doing
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