What is the meaning of average variable cost

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What is the Meaning of Average Variable Cost?

Average variable cost (AVC) is a measure of cost efficiency in production. It is calculated by dividing the total variable costs of production by the number of units produced. Variable costs are those costs that change with the level of production, such as the cost of raw materials, labor, and energy.

Average variable cost can be used to measure the efficiency of production in a variety of ways. For example, if a business is producing more units with the same variable costs, then the average variable cost is decreasing, indicating that the company is becoming more efficient. Conversely, if the average variable cost is increasing, then the company is becoming less efficient.

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Average variable cost is also used to analyze the profitability of a business. If the average variable cost is greater than the price of the product, then the business will not be able to make a profit. Conversely, if the average variable cost is less than the price of the product, then the business will be able to make a profit.

Average variable cost is an important concept in economics and business, as it provides a measure of cost efficiency and profitability. Understanding average variable cost can help businesses make informed decisions about production and pricing.

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