ECONOMICS

Detailed explanation-1: -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.

Detailed explanation-2: -Average cost (AC), also known as average total cost (ATC), is the average cost per unit of output. To find it, divide the total cost (TC) by the quantity the firm is producing (Q).

Detailed explanation-3: -Average variable cost (AVC) is the variable cost per unit of total product (TP). To calculate AVC, divide variable cost at a given total product level by that total product. This calculation yields the cost per unit of output.

Detailed explanation-4: -Average Cost equals the per-unit cost of production which is calculated by dividing the total cost by the total output. Total cost means the sum of all costs, including the fixed and variable costs. Therefore, Average Cost is also often called the total cost per unit or the average total cost.

Detailed explanation-5: -Consequently, total cost is fixed cost (FC) plus variable cost (VC), or TC = FC + VC = Kr+Lw.