The point at which marginal cost equals average total cost (MC = ATC) is known as the break-even point.
What happens if the marginal cost curve is U shaped?
The Marginal Cost curve has a U-shaped structure because total costs and variable costs first rise at a declining rate as a firm increases output. Economies of scale and the Law of Diminishing Returns cause the marginal cost to decrease to its lowest point at this point.
What does U shaped average cost curve show?
Because all fixed costs are incurred prior to any production, the average cost curve often has a U-shape, and marginal costs are typically rising due to declining marginal productivity.
What is break even point?
The break-even threshold is reached when overall costs and total revenues are equal, leaving your small firm with no net benefit or loss. In other words, you've achieved the point in production where the revenue from a product equals the cost of manufacture.
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