Refer to the figure. Which curve is most likely to represent marginal cost?

• A. The curve that lies entirely below the average variable cost curve.
• B. The horizontal curve representing constant costs.
• C. The upward-sloping curve that intersects the average total cost at its minimum point.
• D. The downward-sloping curve that never increases.

Answer: (C)

Verified step by step guidance

1. Recall the definition of the marginal cost (MC) curve: it shows the additional cost of producing one more unit of output.
2. Understand the relationship between marginal cost and average total cost (ATC): the MC curve intersects the ATC curve at the ATC's minimum point.
3. Analyze the given options: the MC curve cannot lie entirely below the average variable cost (AVC) curve because MC affects both AVC and ATC as output changes.
4. Recognize that a horizontal curve representing constant costs would imply constant marginal cost, which is not typical for most production processes where MC usually changes with output.
5. Identify the upward-sloping curve that intersects the average total cost curve at its minimum point as the marginal cost curve, since this matches the theoretical behavior of MC in microeconomics.