Question

Q.5 Discuss the relationship between average cost, average variable cost and marginal cost. Draw a
diagram depicting the relationship.​

Answer 1

Answer:

Average variable cost (AVC): variable costs divided by output (AVC = TVC/q).

The average variable cost curve is normally U-shaped.

Marginal cost (MC): the change in the total cost when the quantity produced changes by one unit. Cost curves: a graph of the costs of production as a function of total quantity produced.