Question 3 B Do you agree with this statement, MC curve crosses the ATC curve at its minimum? Why?

Question 3 B Do you agree with this statement, MC curve crosses the ATC curve at its minimum?

Why?

Answer

As long as the MC curve is below the ATC, it pulls the ATC downward. This is true even if MC is increasing — all that’s necessary is that MC is below the ATC. When the MC curve is above the ATC curve, it pulls the ATC up — the opposite effect of what happened when MC was below the ATC curve. The only place where MC doesn’t affect the ATC curve is the one where MC exactly equals ATC — the transition point where MC stops dragging ATC down and starts instead to pull it up. The geometric definition of a local minimum or maximum is that a function stops increasing (decreasing) and begins decreasing (increasing). A tangent at that point is parallel to the horizontal axis. And that’s exactly what happens when the MC curve intersects the ATC curve. Look at a properly drawn textbook graph and confirm for yourself that there is a horizontal line that is tangent to the ATC at its minimum.

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