Average Total Costs [ATC] Law and Legal Definition

Average total cost (ATC) is the amount invested for producing each unit of output. The average cost is calculated by dividing total cost by the quantity of output. Generally, ATC can be found in two ways. The first step is by dividing total cost by the quantity of output. Second method is by summing average variable cost and average fixed cost. Since the average total cost decreases with additional production at relatively small quantities of output, and then eventually increases with relatively large quantities of output, the ATC curve is usually U shaped. When equated with per unit revenue, ATC indicates the per unit profitability of a profit-maximizing firm.