Question
Draw Average Variable Cost (AVC), Average Total Cost (ATC) and Marginal Cost (MC) curves in a single diagram. State the relation between MC curve and AVC and ATC curves.
✓
Answer
Relation between MC curve and AVC and ATC curves:
- When MC is lower than ATC or AVC, then ATC or AVC falls.
- When MC = ATC or AVC, then ATC or AVC is constant. (MC curve intersects both the AVC curve and ATC curve at their minimum points, (l and m) from below.
- When MC is greater than ATC or AVC, then ATC or AVC rises.
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