Total cost of production divided by quantity produced. Average cost is the sum of average fixed cost and average variable cost. 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 average cost can be defined only if it is possible to attribute particular costs to particular products.