Average variable cost (AVC) is an economics term that refers to a firm's variable costs (labor, electricity, etc.) divided by the quantity (Q) of output produced. Variable costs are those costs which vary with output.
Where:
- VC = Variable Cost
- AVC = Average Variable Cost
- Q = Quantity of Output Produced
Average variable cost plus average fixed cost equals average total cost:
Short run average variable cost equals the wage rate, w, divided by the average product of labor, APL
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