The Marginal Cost curve is U shaped because initially when a firm increases its output, total costs, as well as variable costs, start to increase at a diminishing rate. At this stage, due to economies of scale and the Law of Diminishing Returns, Marginal Cost falls till it becomes minimum.

Which curves does the marginal cost curve intersect at the their minimum point?

B)Explanation: Marginal cost (MC) curve intersects the average total cost (ATC) curve and average variable cost (AVC) at their minimum point and the output corresponding to the minimum point of ATC shows the capacity output of the firm. Therefore, option B is the correct answer.

Why does MC cross ATC at its minimum?

The marginal cost curve always intersects the average total cost curve at its lowest point because the marginal cost of making the next unit of output will always affect the average total cost. As a result, so long as marginal cost is less than average total cost, average total cost will fall.

Why is the marginal cost curve always at its lowest point?

What’s the difference between fixed cost and marginal cost?

Fixed cost is that component of total cost that doesn’t change with output. However marginal cost equals average cost and average variable cost at their respective lowest points. Average cost (as well as average variable cost) falls as long as marginal cost is below them.

How is the output represented in a cost curve?

The output is represented along OX and cost along OY; AFC curve represents average fixed cost. AVC curve represents average variable cost, ATC curve represents average total cost (i.e., total of AFC and AVC and is called AC, i.e., average cost).

How is the marginal cost related to the average product?

Marginal cost (MC) is the extra cost incurred when one extra unit of output is produced. Average product (AC) is the total cost per unit of output. When the MC is smaller the AC, the AC decreases.