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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383

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BuyFindarrow_forward

Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383
Textbook Problem

Why does the MC curve cut the ATC curve at the latter’s lowest point?

To determine

Explain the reason for firm’s marginal cost curve is cut the lowest point of average total cost curve.

Explanation

In initial level of production, average total cost decreases as output increases. The reason is that when the huge fixed cost is spread among the huge output, it starts decreases. After certain point, average total cost increases as production increases due to dis-economies of scale.

The marginal cost curve depicts the additional due to increasing the one more unit of output. In the initial time, the firm facing economies of scale which results decreasing the additional cost of production for one more unit of output...

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