Fuel saving device

In economics, average variable cost (AVC) is a firm's variable costs (labor, electricity, etc.) divided by the quantity (Q) of output produced. Variable costs are those costs which vary with output.

$\text{AVC}=\frac{\text{VC}}{\text{Q}}$

where VC = variable cost, AVC = average variable cost, and Q = quantity of output produced.

Average variable cost plus average fixed cost equals average total cost:

$\text{AVC}+\text{AFC}=\text{ATC}.$

In many or most contexts, average variable cost declines as the level of output increases at low levels of output, and then bottoms out and begins increasing as output increases further. Hence the curve depicting average variable cost is roughly U-shaped.

See also

• Variable cost
• Fixed cost
• Cost curve