Question

A firm discovers that if it either increases or reduces output, its short-run average cost increases. It follows that:

A. The firm is maximising profit at its present output.
B. The firm is maximising its marginal cost at its present at its present output.
C. The firm is producing at the point where marginal cost equals average cost.
D. Diseconomies of scale are present.
E. Total costs are at a minimum.

Answer 1

The correct answer is C. The firm is producing at the point where marginal cost equals average cost.

Step-by-step explanation:

According to the cost curve, if the marginal component is exactly equal to the total cost, the average total cost is the minimum. If the marginal cost equals variable cost, the moving average cost is the minimum.