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The main result of the paper is that the growth rate of real short-run average cost can be decomposed into two terms: the growth rate of multi-factor productivity and the Berndt-Fuss capacity utilization effect. This decomposition can be carried out using prices and quantities alone without resorting to the econometric estimation of the parameters of the production function. A second result explores the relationship between the true multi-factor productivity residual, real short-run unit cost, and the ‘false’ multi-factor productivity residual obtained by erroneously assuming that all factors are fully flexible. It is shown that the growth rate of real short-run average cost equals the growth rate of the false residual, and that the false and true residuals differ by the Berndt-Fuss capacity utilization effect.