Principles of Economics, 7th Edition

Published by South-Western College
ISBN 10: 128516587X
ISBN 13: 978-1-28516-587-5

Chapter 13 - Part V - The Costs of Production - Questions for Review - Page 275: 6

Answer

Please see the graph.

Work Step by Step

The marginal cost curve has increasing costs, so that is why the marginal cost curve always increases and never decreases. The average total cost curve has minimal output (at the left side of the graph), so those few units split the large costs. However, as there are more units produced, the average total cost curve starts to flatten out. The marginal cost curve and the average total cost curve intersect at the lowest value of average total cost. (There is a point where the average total cost per unit decreases and then increases.)
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