Marginal Cost acts like a magnet for average cost because as the marginal cost goes up, the average cost goes up slightly, following the MC (like a magnet). When the marginal cost decreases, the average cost decreases slightly also. This also explains why the marginal crosses the average at the minimum or maximum. Once the marginal cost curve intersects the average cost curve, the average will change directions since it follows the marginal. For example, if the marginal cost curve had been below the average cost curve, and then the marginal cost curve starts to rise and intersect the average cost curve, the average cost curve will start to rise too.

In this picture you can see that the marginal cost curve intersects the average cost curve at its lowest point. This is because the AC curve is always following the MC curve like a magnet. Once the MC curve intersects the AC curve, the AC will start to rise again.

When Nick Punto strikes out in this at-bat(marginal), it acts as a magnet, and pulls his average down.

Pause at 10 seconds... if more than 280 children drown in pools this year, the average will be pulled up,
while if less than 280 drown in pools this year, the average will be pulled down.

Q: Where does the marginal cost curve intersect the average cost curve?
a. At the average cost curve's lowest point
b. At the average cost curve's midpoint
c. At the marginal cost's lowest point
d. At the marginal cost's midpoint

Pause at 10 seconds... if more than 280 children drown in pools this year, the average will be pulled up,

while if less than 280 drown in pools this year, the average will be pulled down.

Q: Where does the marginal cost curve intersect the average cost curve?

a. At the average cost curve's lowest point

b. At the average cost curve's midpoint

c. At the marginal cost's lowest point

d. At the marginal cost's midpoint

Answer: a.

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