Average total cost is referred to as the sum total of all production costs divided by the total quantity of output. In other words, the average cost is the combination of total fixed and variable costs, which is divided by the total number of units that are produced by the firm.
The average total cost can be calculated following these simple steps
1.Determine the total quantity
2. Determine the total cost
3. Divide the total cost by total quantity
Mathematically, the average cost formula can be expressed as
ATC = TC / Q
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