Where does the marginal cost (mc) curve intersect the average variable cost (avc) curve?

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When comparing the marginal cost curve and the average variable cost curve, production planners use each differently. Business owners use marginal cost to understand the costs and benefit of producing one additional item. Average variable cost is used to show how costs from increasing output fall, become flat, and then increase as production costs outweigh benefits. The marginal cost curve and the average variable cost curve can never be exactly the same but the two do intersect. This intersection is useful for finding optimal production levels.

Curves Cross

1. There is one point where the marginal cost curve and the average variable cost curve intersect. They intersect at the lowest point of the average variable cost curve. The marginal cost curve represents how much more the next unit costs than the previous unit. As the costs of the next unit increase, they affect the average cost at that quantity, essentially flattening the curve when marginal cost is below average cost and pulling the curve up when marginal cost is above average cost.

Marginal Cost Curve

1. Marginal cost gives a representation of what happens to the next unit, or marginal unit, at each production level. It is derived by calculating change in total cost divided by change in quantity of output. Visually, the marginal cost curve is concave up because initially marginal costs fall to a point and then rise again. As an example, a bottled water producer creates cases of bottled water. With each successive case, the producer evaluates changes in total cost. This gives the producer a curve of the costs for the next case, or marginal case, of water. Initially, costs will fall as efficient levels are reached. However, costs of aquiring additional water, more bottles, and additional labor tend to rise as quantity produced rises: causing the marginal costs curve to bend upward.

Average Variable Cost Curve

1. Average variable cost gives a representation of the average cost at a specific production level by comparing two entries, variable cost divided by quantity. The average variable cost curve is a representation of costs at specific quantities. Visually, the average variable cost curve is concave up but starts higher and is much flatter than the marginal cost curve. Continuing our example, lets assume that labor is our only variable cost and evaluate it at increasing production levels. Initially, labor can produce cases more efficiently. However, as production increases, labor will pass an efficient point and slow down or more labor will be needed. As a result average variable costs will rise.

Curves Compared

1. There are two main reasons that these curves cannot be the same. Marginal cost calculates a value based on the differences between or changes in cost and quantity. Average variable cost calculates the value at a specific quantity.

Where does the marginal cost MC curve intersect the average variable cost AVC curve quizlet?

Where does the marginal cost MC curve intersect the average variable cost AVC curve multiple choice question?

Where would the MC curve intersect with the AVC curve?

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