Economics Cost Of Production Questions
Average variable cost (AVC) is a measure of the cost per unit of output that varies with the level of production. It represents the variable costs incurred in producing each unit of output.
To calculate average variable cost, divide the total variable cost (TVC) by the quantity of output (Q). The formula for AVC is:
AVC = TVC / Q
Total variable cost includes expenses such as raw materials, direct labor, and other variable inputs that change with the level of production. Quantity of output refers to the number of units produced.
By calculating AVC, firms can assess the efficiency of their production process and make informed decisions regarding pricing, production levels, and cost management.