When the marginal cost curve is below the average total cost curve, the average total cost must be . Therefore, the marginal cost curve intersects the average total cost curve .

MC < AC ; AC fall . MC intersect AC at its minimum.

Explanation:

Marginal Cost is the addition to Total Cost with an additional unit of production is produced. ΔTC/ΔQ

Average Cost is the average cost per unit of output produced. TC/Q

Both the curves are U shaped curves.

Relationship between AC & MC is as undermentioned :

MC < AC ;  AC falls

MC = AC ; AC is minimum

MC > AC ; AC rise.

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