Short Note

Why does the SMC curve cut the AVC curve at the minimum point of the AVC curve?

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#### Solution

SMC curve always intersect the AVC curve at its minimum point. This is because to the left of the minimum point of AVC, SMC is below AVC. SMC and AVC both fall but the former falls at a faster rate. At the minimum point K, AVC is equal to SMC. Beyond K, AVC and SMC both rise but the latter rises at a faster rate than the former and also SMC lies above AVC. Therefore, the only point where SMC and AVC are equal is where SMC intersects AVC, i.e., at the minimum point of the AVC curve.

Concept: Cost - Average Variable Cost

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