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Average Cost

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PPGPortal > Home > Concept Dictionary > A > Average Cost
 
Average Cost 

The price per unit that it costs a firm to produce a given number of units of output

(Dwayne Benjamin, PPG 1002)

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In cases of constant returns to scale, the cost per unit of output will be constant no matter what level of output the firm wants to produce. If there is increasing returns to scale, the average costs of production will tend to fall as the level of production rises. If there is decreasing returns to scale, average costs will rise as output increases.

     

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