Relationship Between Marginal Costs and Average Costs

Relationship Between Marginal Costs and Average Costs

• ·        When marginal cost exceeds and average cost, average cost must be rising.
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• ·        When marginal cost is less than average cost, average cost must be falling.

• ·        Marginal cost curves always intersect average cost curves at the minimum of the average cost curves
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• ·        The position of the marginal cost relative to average total cost tell us whether average total cost is rising or falling.

           If MC > ATC, Then average cost is rising.

 If MC = ATC, then average cost is at low point

 If MC < ATC, then average cost is falling