The correct answer is: A. When the MC curve is less than AC curve.
The average cost curve (AC curve) is a graph that shows the average cost of producing a certain quantity of goods. The marginal cost curve (MC curve) is a graph that shows the additional cost of producing one more unit of goods.
The AC curve falls when the MC curve is less than the AC curve. This is because when the MC curve is less than the AC curve, the average cost of producing each additional unit of goods is decreasing. This means that the firm is becoming more efficient at producing goods.
The AC curve rises when the MC curve is greater than the AC curve. This is because when the MC curve is greater than the AC curve, the average cost of producing each additional unit of goods is increasing. This means that the firm is becoming less efficient at producing goods.
The AC curve is equal to the MC curve when the firm is producing at the optimal level of output. This is because when the firm is producing at the optimal level of output, the marginal cost of producing one more unit of goods is equal to the average cost of producing all of the goods that the firm is producing.
I hope this explanation is helpful. Please let me know if you have any other questions.