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In economics, average variable cost (AVC) is a firm's variable costs (VC; labour, electricity, etc.) divided by the quantity of output produced (Q): = Average variable cost plus average fixed cost equals average total cost (ATC): A V C + A F C = A T C . {\displaystyle AVC+AFC=ATC.}
Average variable cost (AVC/SRAVC) (which is a short-run concept) is the variable cost (typically labor cost) per unit of output: SRAVC = wL / Q where w is the wage rate, L is the quantity of labor used, and Q is the quantity of output produced. The SRAVC curve plots the short-run average variable cost against the level of output and is ...
3. The Average Fixed Cost curve approaches zero asymptotically. The Average Variable Cost curve is never parallel to or as high as the Average Cost curve due to the existence of positive Average Fixed Costs at all levels of production; but the Average Variable Cost curve asymptotically approaches the Average Cost curve from below. 4.
If producing 5 shirts generates an average total cost of 11 dollars and average variable cost of 5 dollars, the fixed cost would be 6 dollars. Similarly, the firm produces 10 shirts and average total cost and average variable cost is 10 dollars and 7 dollars respectively. In this case, the average fixed cost would be 3 dollars.
Average variable cost (A.V.C) = variable costs divided by output. AVC =TVC/q. The average variable cost curve is typically U-shaped. It lies below the average cost curve and generally has the same shape - the vertical distance between the average cost curve and average variable cost curve equals average fixed costs.
Total product (= Output, Q) = Quantity of goods; Average Variable Cost (AVC) = Total Variable Cost / Quantity of goods (This formula is cyclic with the TVC one)
The short run shutdown point for a competitive firm is the output level at the minimum of the average variable cost curve. Assume that a firm's total cost function is TC = Q 3-5Q 2 +60Q +125. Then its variable cost function is Q 3 –5Q 2 +60Q, and its average variable cost function is (Q 3 –5Q 2 +60Q)/Q= Q 2 –5Q + 60. The slope of the ...
Some common examples include sales commission, labor costs, and the costs of raw materials.. For a business which produces clothing, variable cost would include the direct material, i.e., cloth, and the direct labor.