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  Average Variable cost

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 Cost
TVC = Total Variable Cost
Q = number of units of output produced

Average 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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