In short run cost analysis, the marginal cost curve intersects the average variable cost curve from which side at the minimum point of average variable cost?

Introduction / Context:
Short run cost curves in microeconomics, such as marginal cost and average variable cost, have well known relationships that are tested frequently in exams. Knowing how these curves interact is important for understanding production decisions and cost minimisation by firms. This question focuses on the specific way in which the marginal cost curve intersects the average variable cost curve.

Given Data / Assumptions:

• We consider a firm in the short run with fixed and variable costs.
• Average variable cost is the variable cost per unit of output.
• Marginal cost is the extra cost of producing one more unit of output.
• Cost curves show the usual U shaped pattern due to increasing and then diminishing returns.

Concept / Approach:
A key principle of average and marginal relationships is that when marginal magnitude is below the average, it pulls the average down, and when marginal is above the average, it pushes the average up. The same logic applies to average variable cost and marginal cost. The point where marginal cost intersects average variable cost is exactly where average variable cost is at its minimum level. At that point, marginal cost is equal to average variable cost and the marginal cost curve crosses the average variable cost curve from below.

Step-by-Step Solution:
1. When marginal cost is less than average variable cost, producing an extra unit reduces the average variable cost. 2. Therefore, average variable cost is falling as long as marginal cost lies below it. 3. When marginal cost becomes equal to average variable cost, the average variable cost reaches its minimum point. 4. Beyond this point, marginal cost rises above average variable cost and pulls the average up, making it increase. 5. Graphically, this behaviour means the marginal cost curve intersects the average variable cost curve from below at the minimum point of average variable cost.

Verification / Alternative check:
You can verify this using any numerical example. If the average variable cost is 10 and marginal cost for the next unit is 8, the new average will fall below 10. If average variable cost is 10 and marginal cost is 12, the new average will rise above 10. The transition from falling to rising average variable cost occurs exactly when marginal cost equals average variable cost, which is the minimum point. This confirms the graphical relationship described.

Why Other Options Are Wrong:
Option A: From the top would imply that marginal cost is above average variable cost when they meet at the minimum, which contradicts the average and marginal relationship.
Option C and D: References to right or left are not meaningful in terms of the standard description of this intersection and mis describe the economic relationship.
Option E: It is factually incorrect; the marginal cost curve must intersect average variable cost if the curves are U shaped and well behaved.

Common Pitfalls:
Students often mix up average variable cost and average total cost, but the same relationship with marginal cost holds for both. Another common error is to think that marginal cost intersects at some random point rather than specifically at the minimum of the average curve. Always remember the general rule: when marginal is below average, average falls; when marginal is above average, average rises; they are equal at the minimum or maximum of the average curve, and in cost theory this is a minimum point.

Final Answer:
From below at the minimum point