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Relationship Between Marginal Cost And Average Cost Curve - Cost Analysis
Managerial Economics - Cost Analysis
Relationship Between Marginal Cost And Average Cost Curve - Cost Analysis
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The marginal cost and average cost curves are U shaped because of law of diminishing returns.
Relationship Between
Marginal Cost And Average Cost Curve:
The marginal cost and average cost curves are U shaped because of law of diminishing returns. The marginal cost curve cuts the average cost curve and average variable cost curves at their lowest point. Marginal cost curve cuts the average variable cost from below. The AC curve is above the MC curve when AC is falling. The AC curve is below the MC when AC is increasing. The intersecting point indicates that AC=MC and that is the minimum average cost with an optimum output. (No more output can be produced at this average cost without increasing the fixed cost of production)
The marginal cost and average cost curves are U shaped because of law of diminishing returns. The marginal cost curve cuts the average cost curve and average variable cost curves at their lowest point. Marginal cost curve cuts the average variable cost from below. The AC curve is above the MC curve when AC is falling. The AC curve is below the MC when AC is increasing. The intersecting point indicates that AC=MC and that is the minimum average cost with an optimum output. (No more output can be produced at this average cost without increasing the fixed cost of production)
Tags : Managerial Economics - Cost Analysis
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