Question

Which of the following statements is false? Marginal cost will equal average total cost when average total cost is at its lowest point. When marginal cost is greater than average total cost, average total cost will rise. When marginal cost is less than average total cost, average total cost will fall. Marginal cost will equal average total cost when marginal cost is at its lowest point.

Answer 1

Answer:

Marginal cost will equal average total cost when marginal cost is at its lowest point.

Explanation:

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.

When marginal cost is below average total cost, average total cost will be falling, and when marginal cost is above average total cost, average total cost will be rising. A further m is most productively efficient at the lowest average total cost, which is also where average total cost (ATC) = marginal cost (MC).

Answer 2

Answer:

Marginal cost will equal average total cost when marginal cost is at its lowest point.

Explanation:

Average total cost measures total cost per unit produced, including variable and fixed costs. Unless a company has no fixed costs, then this statement is completely false. Marginal cost per unit measures the cost of producing one additional unit of output. Generally marginal cost will first intersect average variable cost first and then will intersect average total cost.

The first units produced generally have a very high average total cost due to the fact that fixed costs must be divided by a small amount of units. As production output increases, fixed costs per unit decrease, and so does average total costs. Marginal cost will intersects average total cost at its lowest point. If you look at the attached graph, that would be (Q,P).