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What happens to the average total cost when marginal cost is equal to average total cost?

Average And Total Cost MCQs for PPSC, FPSC, NTS, and Pakistan government job tests. Select an option below, then read the explanation.

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Subject
Average And Total Costeconomics-mcqs › average-and-total-cost
Published
2 Jun 2019
Last updated
28 May 2026

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Explanation

When marginal cost equals average total cost, the average total cost is at its minimum value. This is because if marginal cost is below average total cost, the average is decreasing, and if it is above, the average is increasing. Therefore, equality indicates the lowest point of average total cost.

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Practice related questions from the same subject.

  1. 1.When a production function shows initially rising marginal product followed by diminishing marginal product as output grows, how will the marginal cost curve behave?
  2. 2.What happens to the average total cost when marginal cost is less than the average total cost?
  3. 3.Which of the following statements accurately describes cost behavior over time?
  4. 4.How does the slope of a production function change when it demonstrates diminishing marginal returns?
  5. 5.Naila runs a small pottery business producing 1,000 items annually, each sold at Rs 100. The raw materials cost her Rs 20,000 for these 1,000 pieces. She has invested Rs 100,000 in the factory and equipment, half from her own savings and half borrowed at an interest rate of 10%. (Assume she could have alternatively invested her own money elsewhere at 10% interest.) Additionally, Naila has the option to work at another pottery factory earning Rs 40,000 per year. What is the economic profit from Naila's pottery business?
  6. 6.Economic profit is calculated by subtracting which type of costs from total revenue?
  7. 7.At what output level is production most efficient by minimizing which cost?
  8. 8.Over the long term, if a very small factory increases its production size, what is it most likely to encounter at the start?
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