Question
How to find average variable cost when you only have output and total cost
Answers
GPT 3.5
To find the average variable cost (AVC) when you only have output and total cost, you need to subtract the average fixed cost (AFC) from the average total cost (ATC). Here's the step-by-step process:
1. Determine the average fixed cost (AFC):
- Divide the total cost by the output to find the average total cost (ATC).
- Subtract the average variable cost (AVC) from the average total cost (ATC) to find the average fixed cost (AFC).
Equation: AFC = ATC - AVC
2. Calculate the average variable cost (AVC):
- Divide the total cost by the output to find the average variable cost (AVC).
Equation: AVC = Total Cost / Output
Remember to differentiate between the short-run and long-run average variable cost, as the fixed costs may change. The above steps are suitable for short-run analysis, where fixed costs are assumed to be constant.
1. Determine the average fixed cost (AFC):
- Divide the total cost by the output to find the average total cost (ATC).
- Subtract the average variable cost (AVC) from the average total cost (ATC) to find the average fixed cost (AFC).
Equation: AFC = ATC - AVC
2. Calculate the average variable cost (AVC):
- Divide the total cost by the output to find the average variable cost (AVC).
Equation: AVC = Total Cost / Output
Remember to differentiate between the short-run and long-run average variable cost, as the fixed costs may change. The above steps are suitable for short-run analysis, where fixed costs are assumed to be constant.