Definition
- Average cost
- Average cost is total cost divided by the quantity of output produced, the cost on average of each unit made.
- Not to be confused with: Marginal cost
- Marginal cost is the additional cost of producing one more unit of output, the change in total cost divided by the change in output.
Test yourself
What is the difference between average cost and marginal cost?
Average cost shares the total over every unit made; marginal cost is the cost of the next unit alone.