When the marginal cost is equal to average cost, the slope of the average cost is :

Key Points

Average Cost: Average cost refers to the cost per unit of output. It is the ratio of the total cost to the total output.

Average Cost (AC) = Total Cost / Output = TC / Q

Marginal cost: Marginal cost refers to the addition made to the total cost on account of the production of one more unit of output.

Marginal Cost (MC) = Change in total cost / Change in output = δ C / δ Q

Important Points

•  The zero slope of the average cost curve implies that the cost has reached its minimum level.
•  At the minimum level, the average cost becomes equal to the marginal cost.

Relationship between Average Cost and Marginal Cost

• If the slope of AC is less than zero or negative, then MC < AC.
• If the slope of AC is equal to zero or constant, then MC = AC
• If the slope of AC is greater than zero or positive, then, MC > AC

Diagrammatic presentation of the relationship between AC and MC

• At point M in the figure, MC = AC, and the MC curve is intersecting the AC curve at the minimum level of the average cost curve.
• At this point, the slope of the AC curve becomes zero, implying constancy of average cost.

Hence, on the basis of the above relationship, it is clear that when marginal cost is equal to average cost, the slope of average cost is zero.