At what point is marginal cost at its minimum in the context of a firm's production?

• A. When total cost is zero
• B. When marginal product is at its maximum
• C. When average total cost is at its minimum
• D. When marginal revenue equals marginal cost

Answer: (B)

Verified step by step guidance

1. Understand the relationship between marginal cost (MC) and marginal product (MP). Marginal cost is the additional cost of producing one more unit of output, while marginal product is the additional output from one more unit of input (usually labor).
2. Recall that marginal cost is inversely related to marginal product. When marginal product is increasing, marginal cost is decreasing, and when marginal product is decreasing, marginal cost is increasing.
3. Identify the point where marginal cost is at its minimum. This occurs exactly when marginal product reaches its maximum because at this point, the firm is getting the most output per additional input, making the cost of producing an extra unit the lowest.
4. Note that this point is not necessarily when total cost is zero, nor when average total cost is at its minimum, nor when marginal revenue equals marginal cost. These are different concepts related to cost and revenue optimization.
5. Summarize: The minimum point of marginal cost corresponds to the maximum point of marginal product due to their inverse relationship in production theory.