Question

Distinguish between average variable cost and average fixed cost

Answer 1

Answer:

The difference between average total cost and average variable cost is average fixed cost. Average fixed cost decreases as output increases, so the difference between average total cost and average variable cost must also continuously decrease. ATC = AVC + AFC , so ATC − AVC = AFC .

Answer 2

Distinguish between average variable cost and average fixed cost :

Average variable cost is the cost that reflects changes in the level of output. Average variable cost can increase or decrease depending on the volume of production in a company.

For example, the cost of different types of raw materials are examples of variable costs.

Average fixed cost refers to the cost in which there is no change in the quantity of goods produced by a firm if there is an increase or decrease. Fixed costs a company has to bear on its own regardless of the level of production. Fixed costs are less controlled than variable costs because they do not depend on factors such as production.

Such as salary, rent, and assets etc.

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