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Question
State the relation between MC curve and AVC and ATC curves.
Solution
Relationship between AVC and MC
1. When AVC is falling, MC falls at a faster rate and stays below AVC curve.
2. When AVC is rising, MC rises at a faster rate and remains above AVC curve.
3. When AVC is at minimum point (y), MC is equal to AVC.
4. MC curve cuts AVC curve at its minimum point.
5. The minimum point of MC curve (x) will always lie left to the minimum point of AVC curve (y).
6. AVC and MC both are derived from TVC.
\[AVC = \frac{TVC}{Q}\]
\[MC = \frac{∆ TC}{∆ Q} = \frac{∆ TVC}{∆ Q}\]
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