Total cost of production divided by quantity produced. Average fixed cost necessarily decreases with output. Average variable cost may decrease with output up to the point where limits to capacity become a constraint, after which it tends to rise. If average variable cost rises faster than average fixed cost falls, this produces a U-shaped average cost curve. Where a firm has multiple products, as most actual firms do, the whole concept of average cost depends on the ability to attribute particular costs to particular products, which is often a matter of judgement.

• producer good
• producer's surplus
• product
• product differentiation
• product innovation
• production
• production externality
• production function
• production possibility frontier
• production subsidy
• productive efficiency
• productivity
• product liability
• product life cycle
• professional body
• profit
• profit-and-loss account
• profit maximization
• profit motive
• profit-related pay
• profit-sharing
• profit-taking
• program, entitlement
• program, mandatory spending
• programming, linear