Define cost. State the relation between MC and AV
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Cost-It refers to the expenditure incurred by a producer on the factor as well as non-factor inputs for a given amount of output of a commodity. Relation between Marginal Cost and Average Variable Cost: (i) Both AVC and MC curves are of U-shape. ... (v) When AVC is constant, then MC = AVC (Point b).
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AVC refers to TVC per unit of output and MC is the addition to TVC, when one more unit of output is produced. ii. Both AVC and MC curves are U-shaped due to the Law of Variable Proportions. The relationship between AVC and MC can be better illustrated with the help of following schedule and diagram.
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