Average Total Cost

Definition

Average total cost (ATC) is obtained by dividing total cost by the quantity produced. It represents the average cost per unit of output and includes both fixed and variable costs.

Related terms

Marginal Cost: Marginal cost refers to the additional cost incurred from producing one more unit of output.

Economies of Scale: Economies of scale occur when an increase in production leads to a decrease in average total cost due to factors like specialization or bulk purchasing discounts.

Diseconomies of Scale: Diseconomies of scale happen when an increase in production leads to an increase in average total cost due to factors like coordination difficulties or inefficiencies.