SMC curve cuts AVC curve at its_______.

minimum point

The correct answer is option 1: minimum point

The Short-Run Marginal Cost (SMC) curve cuts the Average Variable Cost (AVC) curve at its minimum point. This happens because of the following cost behavior:

1️⃣ When AVC is falling:

• SMC is less than AVC, meaning additional units of output cost less than the average, pulling the AVC downward.

2️⃣ At the minimum point of AVC:

• SMC = AVC, meaning additional cost equals the average cost, so AVC is neither increasing nor decreasing.

3️⃣ When AVC is rising:

• SMC is greater than AVC, meaning additional units cost more than the average, pushing AVC upwards.