Why MC curve cuts AC at its minimun point ?

Question

Answer

When mc is rising,ac also risingWhen mc is falling,ac also fallsWhen mc cuts the ac from the lowest point, at this point mc = ac

Answer

Law of variable proportion

Answer

Because when marginal cost is lower than the average cost, average cost falls and when marginal cost is more than average cost, average cost rises so both are interesting or equal at the min. point of Ac
or in simple words
when mc falls mc pull ac to be fall and when mc rises mc push ac to be rise so both are equal at min point of ac

Answer

In Economic theory, the MC curve cuts the AC curve at its minimum point due to several reasons:

1. Understanding the MC Curve:
The MC (Marginal Cost) curve represents the additional cost incurred from producing one more unit of output. It is derived from the change in total cost divided by the change in quantity produced. The MC curve typically slopes upward because as production increases, additional units require more resources, leading to higher costs.

2. Understanding the AC Curve:
The AC (Average Cost) curve represents the average cost per unit of output. It is derived by dividing the total cost by the quantity produced. The AC curve is U-shaped because initially, average costs decrease due to economies of scale, but eventually, they increase due to diseconomies of scale.

3. The Relationship between MC and AC:
The MC curve intersects the AC curve at its minimum point because the MC curve influences the shape of the AC curve. This intersection occurs due to the following reasons:

3.1. Law of Diminishing Returns:
The MC curve starts below the AC curve, causing the AC curve to decrease initially. This happens because of the law of diminishing returns, which states that as more units of a variable input are added to a fixed input, the marginal product of the variable input eventually diminishes. Consequently, the additional cost of producing each unit decreases, resulting in a downward-sloping AC curve.

3.2. MC Curve Crosses AC Curve:
As production continues, the MC curve eventually crosses the AC curve. This crossing happens because the MC curve starts to rise due to diminishing returns. The additional cost of producing each unit increases, causing the AC curve to start increasing as well.

3.3. Minimum Point of AC Curve:
The MC curve intersects the AC curve at its minimum point. At this point, the additional cost of producing each unit, represented by the MC curve, equals the average cost per unit, represented by the AC curve. Therefore, the AC curve begins to increase after this point because the additional cost surpasses the average cost.

4. Implications:
The intersection of the MC and AC curves at the minimum point has significant implications for firms. It indicates that the firm is producing at the most cost-efficient level, where the average cost per unit is minimized. This implies that the firm is utilizing its resources optimally and achieving economies of scale.

Conclusion:
In summary, the MC curve cuts the AC curve at its minimum point because of the law of diminishing returns and the relationship between marginal and average cost. This intersection signifies the point of cost efficiency for a firm, where average costs are minimized and economies of scale are achieved.

Top Courses for CommerceView all

Chapter Notes for Commerce

Economics Class 12

Economics Class 11

NCERT Books & Solutions for Commerce

Economics for CBSE Class 12 Board Examinations

Top Courses for Commerce

Top Courses for Commerce

Suggested Free Tests

Related Content

Commerce Courses

Other Courses

How To Prepare?

Related Exams

Company