ECONOMICS

Detailed explanation-1: -The marginal cost curve always intersects the average total cost curve at its lowest point because the marginal cost of making the next unit of output will always affect the average total cost. As a result, so long as marginal cost is less than average total cost, average total cost will fall.

Detailed explanation-2: -When average cost is declining as output increases, marginal cost is less than average cost. When average cost is rising, marginal cost is greater than average cost. When average cost is neither rising nor falling (at a minimum or maximum), marginal cost equals average cost.

Detailed explanation-3: -The point of intersection between the MC and AC curves is also the minimum of the AC curve. This can be explained by the fact that when the cost of the marginal output is equal to the average cost of the output, then the AC neither falls nor rises (i.e. it reaches its minimum).

Detailed explanation-4: -When the marginal unit costs more than the average, the average has to increase. By definition, then, the MC curve intersects the AVC curve at the minimum point on the AVC curve.

Detailed explanation-5: -The marginal cost curve intersects both the average variable cost curve and (short-run) average total cost curve at their minimum points. When the marginal cost curve is above an average cost curve the average curve is rising.