The minimum points of the average variable cost and average total cost curves occur where

The marginal cost represent the cost of producing one additional unit of output. The average variable cost is calculated by dividing total variable costs by the total output. The average total costs is calculated by dividing total costs by the total output.

In order to maximize accounting profits, a firm must sell its products or services at a price that equals marginal cost of production.

*See attached graph, I tried to draw it myself but bad things happened.

PiaDeveau PiaDeveau · Answer 2 · 2021-12-21T16:20:46+01:00

The aggregate expenditure curve and the average cost curve cross at the marginal cost curve.

The contribution margin of generating one more unit of production is represented by the marginal cost.
Total indirect expenses are divided by total production to arrive at the average variable cost.
Total costs are divided by total production to get the average total costs.

A company must offer its products or services at competitive prices that equals its marginal costs in order to maximize accounting profits.

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