ECONOMICS

Detailed explanation-1: -Average total cost (sometimes referred to simply as average cost) is total cost divided by the quantity of output. Since the total cost of producing 40 haircuts is $320, the average total cost for producing each of 40 haircuts is $320/40, or $8 per haircut.

Detailed explanation-2: -Average variable cost – A firm’s total variable cost divided by output (the quantity of product produced).

Detailed explanation-3: -The way to find the AVC is : TC at 0 output is 5 which means fixed cost (FC) is 5. Hence, if we subtract 5 from the TCs for all the subsequent output levels we will get the VC at each output. Now, AVC = VC /Q.

Detailed explanation-4: -i. Both AC and MC are derived from total cost (TC). AC refers to TC per unit of output and MC refers to addition to TC when one more unit of output is produced.

Detailed explanation-5: -ATC = TC / Q This concludes the topic on Average total cost formula, which is a very important concept for making pricing decisions in a business.