Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
fixed costs
B
variable costs
C
total costs
D
marginal costs
Understanding the Answer
Let's break down why this is correct
Answer
To calculate the Average Total Cost (ATC), you divide the total cost by the quantity of output produced. This process helps you understand how much it costs to produce each unit of a good or service. The ATC represents the per-unit cost of production, which includes all costs like materials, labor, and overhead. For example, if a factory spends $1,000 to produce 100 toys, the ATC would be $1,000 divided by 100, resulting in $10 per toy. This means that, on average, it costs the factory $10 to make each toy, giving a clear picture of production efficiency.
Detailed Explanation
Average Total Cost shows how much each item costs on average. Other options are incorrect because Fixed costs are costs that do not change with the amount produced; Variable costs change with production levels.
Key Concepts
Average Total Cost
Total Cost
Fixed and Variable Costs
Topic
Calculating Average Total Cost
Difficulty
medium level question
Cognitive Level
understand
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