Following table considers a situation when MC = AC over a range of output. It is a situation of constant returns to a factor.
Output |
Total Cost |
MC |
AC |
1 |
10 |
10 |
10 |
2 |
20 |
10 |
10 |
3 |
30 |
10 |
10 |
4 |
40 |
10 |
10 |
5 |
50 |
10 |
10 |
The table shows that when constant returns to a factor prevail over a range of output (1-5 units of output), MC remains constant. Consequently, TC increases at a constant rate and MC and AC are found to be equal to each other. In the entire range of output when AC = MC, AC is also found to be constant (like MC).