Copyright © 1995-2004 OnLineTexts.com, Inc. - All Rights Reserved
To the right is a typical Average Variable Cost (AVC) curve shown with a MC curve.
It may be helpful to keep in mind that Average Variable Cost (AVC) and Marginal Costs are two different ways of viewing variable costs.
AVC is simply variable costs divided by output.
One way of thinking
of the relationship between AVC and MC is to think of MC as the most recent cost, or the cost of the last unit produced.
If the cost of the last unit produced was below the average variable
cost, it will bring the average down and vice versa.
Copyright © 1995-2004 OnLineTexts.com, Inc. - All Rights Reserved