In Figure 12.1, at price P1 and quantity Q1: Figure 12.1 Graph-There are four curves on the graph, downward sloping demand curve D=P=AR, below it is MR and there are two other curves, AC and MC; AC is a U-shaped curve and so is MC; MC intersects AC at its lowest point and AC is tangent to the demand curve to the left of this point of intersection; AC is above the demand curve except for the point of tangency with the demand curve; MC intersects MR at quantity Q1; vertically above the intersection of MC and MR at quantity Q1 is a point on the demand curve with a coordinate P1 on the vertical axis and at this point AC is tangent to the demand curve In Figure 12.1, at price P1 and quantity Q1: average revenue is falling faster than marginal revenue. average revenue equals average cost. average cost is below marginal cost. average cost is falling faster than average revenue