Only at its lowest level does marginal cost equal the average total cost, therefore (d) horizontal.
The average total cost is calculated as the overall production costs divided by the total output. To put it another way, the average cost is the sum of all fixed and variable costs divided by the total number of units produced by the company. The marginal cost, or price of producing more, is the adjustment to the total cost that results from increasing the quantity produced.
Therefore, a firm's marginal cost and average total cost at 130,000 units of output are both $0.75. Our analysis leads us to the conclusion that the firm's average total cost curve is horizontal at this output level.
Therefore, Option D - Horizontal is correct.
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