Question

When does the long-run marginal cost (LMC) curve cut the long-run average cost (LAC) curve?

Options

• At the highest point of LAC

• At the minimum point of LAC from below

• At every point of LAC

• Only when LMC is greater than LAC

Answer 1

At the minimum point of LAC from below

Explanation:

LMC is U-shaped, and it intersects LAC from below at the minimum point of LAC, where LMC equals LAC and LAC is neither rising nor falling.​