what will be the condition when AVC is the maximum
Answers
Answer:
Initially, the variable cost per unit of output decreases as output increases. At one point, it reaches a low. After the low, the variable cost per unit of output starts to increase. The increase in AVC after a certain point is indirectly related to the law of diminishing marginal return
Answer:
Average Variable Cost (AVC):
The second aspect of short-run average costs is an average variable cost. Average variable cost is the total variable cost divided by the number of units produced. Hence, if TVC is the total fixed cost and Q is the number of units produced, then
$$AVC =\frac {TVC}{Q}$$
Therefore, AVC is the variable cost per unit of output.
Therefore, AVC is the variable cost per unit of output.Usually, the AVC falls as the output increases from zero to normal capacity output. Beyond the normal capacity, the AVC rises steeply due to the operation of diminishing returns.