The average cost of production is defined as what?

• A. Unit Cost
• B. Total Cost per Output
• C. Average Cost
• D. Marginal Cost

Answer: (A)

The main idea is cost per unit of output. Average cost tells you how much, on average, it costs to produce each unit, calculated as total cost divided by the quantity produced.

Unit cost is just another way of saying cost per unit. If total cost is 1000 and you produce 500 units, the average (unit) cost is 1000 ÷ 500 = 2. So each unit, on average, costs 2. That’s why this option fits the definition.

The other terms can be related but refer to different ideas: marginal cost is the cost of producing one more unit; average cost is the formal term for cost per unit, but in many contexts people use unit cost to mean the same quantity.