Which expression gives average total cost (ATC)?

• A. ATC = FC/OUTPUT
• B. ATC = TVC/OUTPUT
• C. ATC = TC/OUTPUT
• D. ATC = VC/OUTPUT

Answer: (C)

Average total cost tells you the cost per unit when you combine all costs. Since total cost includes both fixed costs and variable costs, the cost per unit is total cost divided by the quantity produced: ATC = TC / Q. Expanding TC as FC + VC shows ATC = (FC + VC) / Q = FC/Q + VC/Q, which is the sum of average fixed cost and average variable cost. This is why using total cost per unit best captures the overall cost per unit, unlike expressions that use only fixed costs (FC/Q), only variable costs (VC/Q), or only variable costs per unit.