Final answer:
The marginal cost curve's position relative to the ATC or AVC curves dictates whether the ATC will rise or fall. Statements a) and b) are correct, showing that the ATC rises when MC is above these curves, but statements c) and d) are incorrect because total fixed costs do not vary with production volume.
Step-by-step explanation:
When analyzing cost curves in economics, particularly in the context of a firm's production costs, the relationship between the marginal cost (MC) curve and average total cost (ATC) or average variable cost (AVC) curves can determine the behavior of the ATC.
When the MC curve lies above the ATC curve, it means that the cost of producing one more unit is higher than the previous average cost, which causes the ATC to rise.
Similarly, when the MC curve is above the AVC curve, it indicates that the marginal unit is more expensive to produce than the average of the units produced before, leading to an increase in the ATC.However, the statement 'c) Below the AVC curve, total fixed cost increases' is incorrect because the position of the MC relative to the AVC curve does not affect total fixed costs, which are constant regardless of the number of units produced.Lastly, 'd) Below the ATC curve, total fixed cost falls' is also incorrect because, once again, total fixed costs do not change with the volume of production
The point where the MC curve intersects the ATC curve represents the minimum point on the ATC curve. This point is critical because any additional unit produced when MC is below this point will decrease the ATC, whereas if MC is above this point, the ATC will increase.