Variable costs of production divided by total output
Short-run cost curves.
Average cost (AC)
Average variable cost (AVC)
Average fixed cost (AFC)
Marginal cost (MC; crosses the minimum points of both the AC and AFC curves)
In economics, average variable cost (AVC) is a firm's variable costs (VC; labour, electricity, etc.) divided by the quantity of output produced (Q):
Average variable cost plus average fixed cost equals average total cost (ATC):
A firm would choose to shut down if the price of its output is below average variable cost at the profit-maximizing level of output (or, more generally if it sells at multiple prices, its average revenue is less than AVC). Producing anything would not generate revenue significant enough to offset the associated variable costs; producing some output would add losses (additional costs in excess of revenues) to the costs inevitably being incurred (the fixed costs). By not producing, the firm loses only the fixed costs.
As a result, the firm's short-run supply curve has output of 0 when the price is below the minimum AVC and jumps to output such that for higher prices, where denotes marginal cost.[1]
^Mankiw, N. Gregory (2001) Principles of Microeconomics, 2e, ch 14, p. 298.
and 25 Related for: Average variable cost information
In economics, averagevariablecost (AVC) is a firm's variable costs (VC; labour, electricity, etc.) divided by the quantity of output produced (Q): A...
variable cost curve (and hence the first derivative of variablecost). A typical averagecost curve has a U-shape, because fixed costs are all incurred...
following short-run cost curves: Short-run average fixed cost (SRAFC) Short-run average total cost (SRAC or SRATC) Short-run averagevariablecost (AVC or SRAVC)...
over a larger number of units of output. Averagevariablecost plus average fixed cost equals average total cost: A T C = A V C + A F C {\displaystyle ATC=AVC+AFC}...
cost reaches its minimum is smaller than the average total cost and averagevariablecost. When the average total cost and the averagevariablecost reach...
of total cost or variablecost. Either of these derivatives work because the total cost includes variablecost and fixed cost, but fixed cost is a constant...
as variable costs. Fixed cost (TFC) are the costs of the fixed assets those that do not vary with production. Total fixed cost (TFC) Averagecost (AC)...
producing if averagevariablecost is less than price per unit, even if average total cost is greater than price; Shut down if averagevariablecost is greater...
MC {\displaystyle {\text{MC}}} curve at and above minimum of the averagevariablecost curve and a segment that runs on the vertical axis from the origin...
output produced. averagevariablecost A firm's variable costs (labour, electricity, etc.) divided by the quantity of output produced. Variable costs are those...
marginal cost, average total cost, averagevariablecost, average fixed cost, and marginal revenue, which is sometimes equal to the demand, average revenue...
The levelized cost of electricity (LCOE) is a measure of the average net present cost of electricity generation for a generator over its lifetime. It...
may demonstrate predation such as the dominant firm pricing below averagevariablecost. The Brooke Group rule The Brooke Group rule was established by...
of voluntary compliance, a legal device Atrioventricular canal Averagevariablecost, a metric used in economics This disambiguation page lists articles...
should not be deemed a "fixed" cost, with its cost spread out over time. Sunk costs should be kept separate. The "variable costs" for this project might...
some productions, an increase in the size of the plant reduces the averagevariablecost, thanks to the energy savings resulting from the lower dispersion...
For the average car owner, depreciation constitutes about half the cost of running a car. The typical motorist underestimates this fixed cost by a significant...
per unit minus the variablecost per unit. "Contribution" represents the portion of sales revenue that is not consumed by variable costs and so contributes...
assist governments in making decisions regarding energy policy. On average the levelized cost of electricity from utility scale solar power and onshore wind...
A cost of funds index or COFI is a regional average of interest expenses incurred by financial institutions, which in turn is used as a base for calculating...
formulas, including specific identification, first-in first-out (FIFO), or averagecost. Costs include all costs of purchase, costs of conversion and other costs...
A continuously variable transmission (CVT) is an automated transmission that can change through a continuous range of gear ratios. This contrasts with...
Global Information
