Identify the correct sequence to establish the relation between marginal cost and average cost.

(A) When Marginal cost falls, average cost also falls.

(B) Marginal cost rises but average cost continues to fall.

(C) Marginal cost is equal to average cost.

(D) Marginal cost rises and average cost also rises.

Choose the correct answer from the options given below:

Option 1 -> Represents the natural progression: MC falls → AC falls; MC rises but below AC → AC continues falling; MC = AC at minimum; MC above AC → AC rises.

Option 2 -> Incorrect sequence as (C) MC=AC cannot occur before (B) the rising phase while AC still falls.

Option 3 -> Incorrect as it starts with (B), but MC cannot rise while AC falls before MC initially falls with AC.

Option 4 -> Incorrect as it starts with (C) MC=AC, which is the equilibrium point, not the starting phase.

Hence, Option 1: (A), (B), (C), (D) -> This represents the correct economic sequence: Initially when marginal cost falls, it pulls down average cost (A). Then MC starts rising but remains below AC, so AC continues to fall (B). At the minimum point of AC, MC equals AC (C). Finally, when MC rises above AC, it pulls AC upward (D). This sequence shows MC intersects AC at its minimum point, which is a fundamental principle in cost theory. -> correct