At which point does the SMC curve cut the SAC curve? Give reason in support of your answer.

Short run marginal cost (SMC) curve cuts the short run average cost (SAC) curve from below at the minimum point of SAC curve, where SAC is constant and at its minimum point.

The reason behind it is -

• When SMC and SAC fall, the SMC falls at a lower rate than SAC

• When SMC and SAC rise, the SMC rises at a greater rate than SAC

Let's understand it with help of graph –

Cost Schedule

GRAPH