Multiple Choice
Marginal analysis in decision-making is best described as which of the following?
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0. Basic Principles of Economics
Marginal Analysis
Multiple Choice
Refer to the figure. Which curve is most likely to represent marginal cost?
A
The curve that lies entirely below the average variable cost curve.
B
The horizontal curve representing constant costs.
C
The upward-sloping curve that intersects the average total cost at its minimum point.
D
The downward-sloping curve that never increases.
Verified step by step guidance1
Recall the definition of the marginal cost (MC) curve: it shows the additional cost of producing one more unit of output.
Understand the relationship between marginal cost and average total cost (ATC): the MC curve intersects the ATC curve at the ATC's minimum point.
Analyze the given options: the MC curve cannot lie entirely below the average variable cost (AVC) curve because MC affects both AVC and ATC as output changes.
Recognize that a horizontal curve representing constant costs would imply constant marginal cost, which is not typical for most production processes where MC usually changes with output.
Identify the upward-sloping curve that intersects the average total cost curve at its minimum point as the marginal cost curve, since this matches the theoretical behavior of MC in microeconomics.
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