Explain why the marginal cost art otter sects the average variable cost curse at

Question

Explain why the marginal cost art otter sects the average variable cost curse at the level of output where average satiable cost is at a minimum. The marginal cost curse intersects the average variable cost curve at the level of output where average variable cost is at a minimum because the firm begins experiencing diminishing returns at this quantity. the firm begins benefiting from specialization at this quantity. when the marginal cost of the last unit produced is below the average. it pulls the average down, and when the marginal cost is above the average, it pulls the average up. when the marginal cost of the last unit produced is increasing, the marginal product of labor is at a minimum. the firm begins experiences economies of scale at this quantity.

Explanation / Answer

Answer:

The marginal cost curve intersects the average variable cost curve at the level of output where average variable cost is at a minimum because ( c) when the marginal cost of the last unit produced is below the average, it pulls the average down and when the marginal cost is above the average, it pulls the average up.

Reason:

As long as AC is decreasing with each additional unit of output, the cost of producing an additional unit of output i.e MC must be less than AC. Therefore for as long as AC is decreasing, MC is below AC and when AC is increasing with each additional unit of output, the cost of producing an additional unit must be greater than AC, so as long as AC is increasing, MC is above AC.

Conclusion:

1). AC falls when MC < AC

2). MC= AVC, when MC and AVC intersects each other at AVC minimum point.

3). AC rises when MC > AVC

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