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Q: At which point does the SMC curve cut the SAC curve? Give reason in support of your answer.

Q: At which point does the SMC curve cut the SAC curve? Give reason in support of your answer.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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**Q:** At which point does the SMC curve cut the SAC curve? Give reason in support of your answer. ### Explanation: The image contains a question about economic cost curves. When studying cost curves in microeconomics: - **SMC (Short-run Marginal Cost) Curve:** This curve represents the additional cost of producing one more unit of output in the short run. - **SAC (Short-run Average Cost) Curve:** This curve shows the average cost per unit of output in the short run. ### Intersection Point: The SMC curve cuts the SAC curve at its minimum point. This occurs because when the marginal cost is below the average cost, the average cost is decreasing. Conversely, when the marginal cost is above the average cost, the average cost is increasing. Therefore, the SMC curve intersects the SAC curve at the lowest point of the SAC, indicating the most efficient scale of production in the short run. Understanding these intersection points is crucial for firms aiming to minimize costs and optimize production efficiency.
Transcribed Image Text:**Q:** At which point does the SMC curve cut the SAC curve? Give reason in support of your answer. ### Explanation: The image contains a question about economic cost curves. When studying cost curves in microeconomics: - **SMC (Short-run Marginal Cost) Curve:** This curve represents the additional cost of producing one more unit of output in the short run. - **SAC (Short-run Average Cost) Curve:** This curve shows the average cost per unit of output in the short run. ### Intersection Point: The SMC curve cuts the SAC curve at its minimum point. This occurs because when the marginal cost is below the average cost, the average cost is decreasing. Conversely, when the marginal cost is above the average cost, the average cost is increasing. Therefore, the SMC curve intersects the SAC curve at the lowest point of the SAC, indicating the most efficient scale of production in the short run. Understanding these intersection points is crucial for firms aiming to minimize costs and optimize production efficiency.
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