Question

Indicate whether you agree or disagree with the following statement. 1- the marginal cost curve intersecrs the average variable cost curve at its minumum.

2- the marginal cost curve intersects the average total cost curve at its maximum.
3- when marginal cost is greater than average variable cost, average variable cost is increasing.
4- when marginal cost is less than average total cost, average total cost is decreasing.

Answer 1

If we plot the graph, we see that Marginal cost intersect Average variable cost between the point where it intersects average cost and minimum point.

1 AND 2. The graph clearly shows that the first and second statement is absolutely wrong and this you can see inthe picture attached with.

3. The third statement indirectly says that marginal cost and average variable cost are directly proportional to each other. This means if one increases the other will also increase and if one decreases the other will also decrease. Yes, this relation exists between marginal cost and average variable cost. We can see from the graph that when marginal cost increases the average variable cost also increases.

4. This directly proportional relationship also exists between the marginal cost and average total cost.