Final answer:
The statement is true; the marginal cost curve intersects with the average cost curve at the minimum of the average cost curve, which is the 'zero profit point' where firms break even.
Step-by-step explanation:
The statement you've asked about is indeed true. To delve deeper, let's consider what happens when marginal costs interact with average costs. Marginal cost (MC) represents the increase in total cost from producing one additional unit, while average cost (AC) represents the total cost divided by the quantity produced so far.
According to economic theory, when the marginal cost is less than the average cost, the average cost is on a downward trend. Conversely, when the marginal cost exceeds the average cost, the average cost is increasing. This relationship holds because the addition of a unit with a marginal cost below the average pulls the average down, while a unit with a marginal cost above the average pulls the average up.
Significantly, the intersection of the MC curve with the AC curve at the latter's minimum point is known as the zero profit point. At this juncture, the company is said to be "breaking even" as the price equals the average cost, implying no economic profit. If the market price lies below the average variable cost, the firm should consider ceasing production to avoid losses, this is the shutdown point. If the price is above average variable cost but below average cost, the firm may continue to operate in the short run but should plan to exit the market in the long run.