Question

What is average variable cost if total variable cost is $500, total fixed cost is $100, and output is 50?

Answer 1

The average variable cost will be $10

Total Variable Cost = $500

Total Fixed Cost = $100

Output = 50

AVC = TVC/Q

AVC = 500/50

AVC = 10

Average variable cost is determined by dividing total variable cost by production volume. Subtract the average variable cost from the average total cost. This ensures that you get an average fixed cost per unit. Average Total Cost (ATC) is determined by dividing Total Cost by Total Production. A typical total cost curve is usually U-shaped.

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