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 average cost of producing one additional 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 all costs that change with the level of production, such as labor, raw materials, and utilities. 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 profitability.