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What is average variable cost?
The average variable cost is represented by the total variable cost per unit of the output produced in production that includes raw materials, labor, etc. It is derived by dividing the total variable cost by total output. The equation of average variable cost is given by:
Where AVC= average variable cost
TVC= Total variable cost
Average cost is used by small firms mostly to maximize the profit incurred. It is used to determine exactly when production should be stopped for a short time. With average variable cost assignment help, you can understand the topic better to judge such situations.
How to understand an average variable cost curve?
The figure above represents the average variable price curve. With average variable cost assignment help, you can learn to read and assess such graphs and report an accurate analysis. While the x- axis in this figure represents the quantity, cost is represented on y-axis.
The curve of average variable cost is U-shaped. This denotes that the monetary value first decreases become constant for a while before rising again. The curve, thus, has three phases:
- The increase in returns which results in the fall of average variable cost.
- Constant returns
- Decreasing returns, this result in the rise in average marginal cost.
The figure below illustrates how average variable cost occurs:
|Quantity||Total variable cost||Average variable cost|
The table illustrates how the Average variable cost increases till the third and becomes constant. The law of variable proportions operates to ensure that. From the fifth unit, however, Average price goes on increasing due to diminishing returns.
What is the relationship between average variable cost and marginal cost?
To understand the relationship between average variable and marginal cost, it is requisite that you opt for average variable cost homework help. Average variable cost and marginal cost are closely related to each other. Listed below is how:
- Average variable cost and marginal cost are both obtained from total
- The curves of both are U-shaped as the law of variable proportions applies to both.
The graph below better illustrates their relationship:
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