Average Variable cost (AVC):
Average variable cost is the variable cost per unit of output. This is the total variable cost divided by the number of units of output generated.
AVC = TVC / Q
Here,
AVC = Average Variable CostTVC = Total Variable CostQ = number of units of output producedAverage variable cost curve is ‘U’ Shaped. As the yield rises, the AVC will fall up to usual capacity output due to the operation of rising returns. However beyond the common capacity output, the AVC will rise due to the operation of diminishing returns.
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