why AC is greater than MC
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When the MC is smaller the AC, the AC decreases. This is because when the extra unit of output is cheaper than the average cost then the AC is pulled down. Similarly, when the MC is greater than the AC, the AC is pulled up. The point of intersection between the MC and AC curves is also the minimum of the AC curve.
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When the MC is smaller the AC, the AC decreases. This is because when the extra unit of output is cheaper than the average cost then the AC is pulled down. Similarly, when the MC is greater than the AC, the AC is pulled up. The point of intersection between the MC and AC curves is also the minimum of the AC curve.
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