Which of the following formulas defines average cost?
A)AC = TC/Q
B)AC = MRP = MFC
C)AC = MPP/Q
D)AC = TC − Q

Question

Quizplus · Accepted Answer

Average cost (AC) is defined as the total cost (TC) divided by the quantity produced (Q). Therefore, AC = TC/Q. Option A is the only formula that defines AC in this way. Option B defines AC as equal to both marginal revenue product (MRP) and marginal factor cost (MFC), which is not an accurate representation. Option C defines AC as equal to marginal physical product (MPP) divided by Q, which is also inaccurate. Option D defines AC as TC minus Q, which makes no sense mathematically.

Which of the Following Formulas Defines Average Cost