The formula to calculate the average variable cost is:
\[ \text{AVC} = \frac{\text{VC}}{\text{Q}} \]
Where:
The average variable cost is defined as the ratio of the variable cost to the total output of a business or good.
Let's consider an example:
Using the formula to calculate the average variable cost:
\[ \text{AVC} = \frac{5000}{1000} = 5 \text{ dollars/unit} \]
This demonstrates that with a variable cost of $5,000 and a total output of 1,000 units, the average variable cost is $5 per unit. ✅
