The lowest point on the average total cost curve is explained by the relationship followed by the marginal cost and average total cost.

The marginal cost is an additional cost due to an extra unit of output.

The average total cost curve is per unit cost of production.

The shape of both the ATC curve and MC is U-shaped.

The graph below explains the relationship.

When the average total cost curve falls, the marginal cost curve is lower than the average total cost curve which means that the marginal cost falls faster than the average total cost.

When the average total cost curve rises, the marginal cost will be greater than the average total cost.

The lowest point on the average total cost curve is at a point where marginal cost is equal to average total cost that is, at point E in the diagram. The marginal cost curve cuts the average total cost curve at its lowest point.

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