Average total cost is the ratio of:
A) total cost to the marginal cost.
B) total cost to the quantity of output.
C) total cost to the amount of variable input.
D) marginal cost to the amount of variable input.

Question

Quizplus · Accepted Answer

Average total cost (ATC) is the total cost of producing a certain quantity of output divided by the quantity of output. Therefore, option B is the correct choice. Option A is incorrect because it compares total cost to marginal cost, which is the cost of producing one additional unit of output. Option C is incorrect because it compares total cost to the amount of variable input, which is a partial cost factor. Option D is incorrect because it compares marginal cost to the amount of variable input, which is not the formulation for ATC.

Average Total Cost Is the Ratio Of