If AC and MC are represented on a graph, the MC curve will cut the AC curve_______

Analyze the question: It asks where the Marginal Cost (MC) curve intersects the Average Cost (AC) curve.

Concept: The relationship between marginal and average values:

• When MC is below AC, it pulls AC down, so AC is falling.
• When MC is above AC, it pulls AC up, so AC is rising.
• AC stops falling and starts rising at exactly the point where MC = AC.

That turning point is the lowest point of the U-shaped AC curve.

Step-by-step:

1. The AC curve is U-shaped because of increasing, then diminishing, returns.
2. MC also falls and then rises, but it rises faster and is steeper.
3. As MC rises, it crosses AC from below at the point where AC is at its lowest.
4. At that point, MC = AC, and AC is at its minimum.

Checking the options:

• A, B, D: "maximum," "highest point," and "peak" all describe the top of a curve. The AC curve is U-shaped and has no peak, so these are wrong.
• C: "Minimum point on the AC curve" is correct.

Answer: C

Exam tip: Remember "MC cuts AC at AC's minimum." The same rule applies to AVC (MC cuts AVC at its minimum) and to the marginal and average product curves. Marginal always crosses average at the average's turning point. In a multiple-choice question, if three options say the same thing (maximum, highest, peak), they are likely distractors.