Answer
The MC curve intersects the ATC and AVC curve at their minimum points as the MC curve represents the cost of of the last unit of good, and when the cost of the last unit is below the average variable cost (or total, as it is in the initial section of the curve), the average would decrease, thus the downward slope of the ATC and AVC curves initially. However, when the cost of the last unit of the good is more than the average, it would pull the average up. Thus, the MC curve would always intersect the ATC and AVC curves at their maximum points, as it would influence the trend of the average curve lines.
Work Step by Step
The average fixed cost curve decreases with an increasing gradient, as total fixed costs stays the same, and average (dividing the same number by an increasing quantity) would derive a decrease with an increasing gradient.
The average variable cost curve is governed by the law of diminishing marginal returns (refer to question 7a), and thus is shaped in a U shape.
Similarly, the average total cost curve is shaped in a U shape, as it is the addition of the fixed and variable cost, and the difference between the total cost and variable cost curve is the fixed cost. Thus, the variable cost and total cost curves will converge closer to each other as the quantity increases and average fixed cost continues to decrease.
