Average cost
Average cost (AC), also called average total cost (ATC), equals Total Cost ÷ Quantity (TC ÷ Q). It represents the cost per unit and is the sum of average fixed cost and average variable cost (AC = AFC + AVC).
Real World
Tesla's average cost per Model 3 fell from over $80,000 in early production to around $36,000 by 2022 as its Gigafactory spread fixed costs across hundreds of thousands of vehicles.
Exam Focus
Draw the U-shaped AC curve and label the minimum point as 'productive efficiency' to access full marks.
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