Microeconomics: Production and Costs · Class 11 · CBSE · Commerce Economics
Assuming smooth cost curves, which relationship must hold at the output level where a firm's average cost is at its minimum?
Practice question from Microeconomics: Production and Costs (Class 11 · CBSE · Commerce Economics), with the correct answer and a step-by-step solution.
hard · MCQ · Q-90696D
Assuming smooth cost curves, which relationship must hold at the output level where a firm's average cost is at its minimum?
- A.Marginal cost is greater than average cost.
- B.Marginal cost is less than average cost.
- C.Marginal cost is equal to average cost.Correct answer
- D.Total fixed cost is equal to total variable cost.
Solution
Average cost falls when marginal cost is below it and rises when marginal cost is above it. Therefore, at the minimum point of average cost, marginal cost equals average cost.
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