Which of the following is true?
In short run
a) Minimum point of AVC comes before Minimum point of ATC.
b) MC cuts AFC and AVC at their minimum points.

a is true, b is not

The correct answer is option 2: a is true, b is not

Statement (a): Minimum point of AVC comes before the minimum point of ATC – True

• The Average Variable Cost (AVC) curve reaches its minimum point before the Average Total Cost (ATC) curve because:
  • ATC = AVC + AFC, and since AFC (Average Fixed Cost) is always decreasing, ATC keeps decreasing even after AVC reaches its minimum.
  • Thus, AVC reaches its lowest point first, and ATC reaches its minimum later due to the influence of AFC.

Statement (b): MC cuts AFC and AVC at their minimum points – False

• Marginal Cost (MC) cuts AVC and ATC at their minimum points, not AFC.
• AFC is always declining and does not have a minimum point, so MC does not intersect AFC at any specific minimum.
• MC always cuts AVC and ATC at their lowest points, but the mention of AFC in the statement makes it incorrect.