State the relationship between Average Cost and Marginal Cost

The relationship between average cost and marginal cost is an important concept in microeconomics and production theory. Both measures provide valuable insights into the cost structure of a firm and play crucial roles in decision-making processes.

Average cost (AC) refers to the total cost of production divided by the quantity of output produced. It represents the cost per unit of output and is calculated by taking the sum of all fixed costs and variable costs associated with production and dividing it by the total number of units produced. Mathematically, it can be expressed as:

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