Which statement is incorrect in the context of relationship between AVC and SMC?

Option 1 -> Correct statement. When AVC is declining, marginal cost must be pulling it down, so SMC < AVC.

Option 2 -> Correct statement. SMC intersects AVC from below at AVC's minimum point, which is a fundamental cost curve relationship.

Option 3 -> Correct statement. When AVC is increasing, marginal cost must be pulling it up, so SMC > AVC.

Option 4 -> Incorrect statement. SMC cuts AVC at the minimum point of AVC, not at the minimum point of SMC.

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Hence, Option 4 -> The SMC curve intersects the AVC curve at the minimum point of AVC (not SMC). The minimum of SMC typically occurs at a lower output level than the minimum of AVC. This is because marginal cost starts rising before average variable cost reaches its minimum. The correct relationship is that SMC cuts AVC from below at the minimum point of AVC, where SMC = AVC. -> correct