Average Variable Cost (AVC)
Definition
Average variable cost (AVC) is obtained by dividing total variable cost by the quantity produced. It shows how much each unit of output contributes to covering variable costs.
Analogy
Imagine you are running a lemonade stand. The average variable cost would be like calculating how much it costs you for each cup of lemonade you sell, considering only the ingredients and supplies used in making it.
Related terms
Total Variable Cost: Total variable cost is the sum of all costs that vary with production levels.
Marginal Cost: Marginal cost represents the additional expense incurred from producing one more unit of output.
Average Fixed Cost (AFC): AFC is calculated by dividing total fixed cost by quantity produced. It shows how much each unit contributes towards covering fixed costs.
"Average Variable Cost (AVC)" appears in:
Study guides (2)
Practice Questions (3)
Which cost curve intersects both the average variable cost (AVC) and average total cost (ATC) at their minimum points?
What is the relationship between average total cost (ATC) and average variable cost (AVC) as quantity increases?
A company experiences a decrease in its average fixed cost (AFC) while its average variable cost (AVC) remains unchanged. Which of the following factors is most likely responsible for this change?
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