Decreasing average total costs occur when the average cost per unit decreases as output increases. It indicates that the firm is becoming more efficient at producing goods or services.
Related terms
Marginal Cost: The additional cost incurred by producing one more unit of output.
Economies of Scope: Cost savings that a firm achieves by producing multiple products or services together.
Long Run Average Total Cost (LRATC): The average total cost when all inputs are variable and the firm can adjust its scale of production.