The marginal cost curve intersects the average variable cost curve at the __________ (LO5) a) shut-down point b) break-even point c) maximum profit point

Marginal cost (MC) is the additional cost of producing one more unit of a good, while average variable cost (AVC) is the total variable cost divided by the quantity of output produced. The MC curve shows how the marginal cost changes as output increases, and the AVC curve demonstrates how the average variable cost changes with output. The shut-down point refers to the minimum point of the AVC curve, break-even point is when Total Cost equals Total Revenue, and maximum profit point is when Marginal Cost equals Marginal Revenue.

The relationship between MC and AVC curves can be described as follows: When marginal cost is below average variable cost, average variable cost is decreasing. When marginal cost is above average variable cost, average variable cost is increasing. The point where MC curve intersects the AVC curve is the point at which the AVC curve reaches its minimum value.

Now that we know the relationship between MC and AVC curves, let's analyze the given options: a) Shut-down Point: This is the point at which a firm decides to stop producing because the price of the product is too low to cover the average variable cost. In this case, we can see the minimum value of AVC curve is reached when MC curve intersects it. Thus, this option is correct. b) Break-even Point: At the break-even point, Total Cost equals Total Revenue. However, this point is not related to the intersection of MC and AVC curves, and thus, this option is not correct. c) Maximum Profit Point: The maximum profit point occurs when Marginal Cost equals Marginal Revenue. This point is also not related to the intersection of MC and AVC curves. Thus, this option is not correct. Based on the analysis, the correct answer is: a) Shut-down Point