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Average Cost
In economics, the average cost (AC), also referred to as the average cost per unit, is defined as the total cost of production divided by the total quantity of output produced. For example, if the total cost of producing a quantity (or units) is represented by the function (or ), the average cost per unit is given by the formula or . It is a key metric for analyzing a firm's cost structure at different levels of production.
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Social Science
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Economics
Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
Ch.7 The firm and its customers - The Economy 2.0 Microeconomics @ CORE Econ
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Intermediate Algebra @ OpenStax
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Related
Variable Unit Costs
Influence of Variable Unit Costs on a Firm's Price and Output Decisions
Fixed vs. Variable Costs
Principle of Increasing Total Costs
Marginal Cost
Further Reading on Costs: Stigler's 'The Theory of Price'
Economies of Scope
Activity: Analysis of a Total Cost Function
Modeling Quantity as a Continuous Variable for Cost Analysis Using Calculus
Convex Cost Functions and Increasing Marginal Cost
A manufacturing firm's total cost (C) to produce a quantity (Q) of items is represented by the function C(Q) = 5,000 + 20Q + 0.5Q². Based only on the structure of this function, what can be determined about the firm's costs?
Analyzing a New Business's Costs
Relationship Between Output and Total Costs
Strategic Analysis of Cost Structures
Match each description of a cost behavior with the corresponding mathematical representation in a firm's total cost function, C(Q), where Q is the quantity of output.
Statement: A firm's total cost to produce a quantity (Q) of a good is described by the function C(Q) = 1000 - 5Q + 0.1Q². This function is a plausible representation of a firm's total costs for all possible positive levels of output (Q > 0).
Interpreting a Firm's Cost Function
A company's total production cost is described by the function C(Q) = 15,000 + 75Q, where Q is the number of units produced. The total expenditure required by the company even if it produces zero units (Q=0) is $____.
Production Technology Choice Analysis
Evaluating a Production Decision
Importance of the Cost Function for a Firm's Output and Pricing Decisions
Constant Unit Cost and Constant Returns to Scale
Modeling Assumption of Constant Unit Cost for Apple Cinnamon Cheerios
Average Cost
Learn After
Average Cost Function for Beautiful Cars
Falling Average Cost
Graphical Representation of Average Cost as the Slope of a Ray from the Origin
A firm's total cost to produce a certain good is described by the function C(Q) = 50 + 2Q², where Q is the quantity of goods produced. What is the cost per unit when the firm produces 10 units?
On a graph where the vertical axis represents a firm's total cost and the horizontal axis represents the quantity of output, consider two points on the firm's total cost curve. A straight line drawn from the origin (0,0) to Point A (representing a lower quantity of output) is steeper than a straight line drawn from the origin to Point B (representing a higher quantity of output). What does this imply about the cost per unit at these two production levels?
Deriving Total Cost from Average Cost
Optimizing Production Efficiency
A firm currently produces 100 units of a product at a total cost of $500. If the firm produces one additional unit, its total cost increases to $504. Based on this information, what is the effect on the firm's cost per unit?
A manufacturing firm increases its daily production output. As a result, its total cost of production also increases. Based only on this information, what can be definitively concluded about the firm's cost per unit?
A firm's total cost of production is given by the function C(Q) = 1000 + 5Q, where Q is the quantity of output. What happens to the cost per unit as the quantity of output (Q) becomes very large?
A firm observes that for every additional unit it produces, its total production cost increases. Based on this observation, it is necessarily true that the firm's cost per unit is also increasing.
Deriving and Interpreting the Average Cost Function
A firm's total cost to produce a good is composed of a fixed cost of $200 (a cost incurred even if no units are produced) and a variable cost of $10 for each unit. Which of the following statements most accurately describes the behavior of the firm's cost per unit as its production quantity increases?
Relationship between Marginal Cost and Average Total Cost