Below is the table for the Total Variable Cost with an added column to reflect the Average Variable cost: Remember no costs at Zero units, so the Average Variable Cost curve starts at one unit and continues at two units, three units, etc. Average Variable Costs start high, go down and after added production go back up, almost like a smile! As production starts the work is not very efficient, after a while workers get better at their jobs and costs go down, eventually as production increases the costs of production increase, hence the shape of the curve. The next cost curve is the Average Variable Cost, again as the name implies these data is obtained by taking the Total Variable Cost and dividing by the number of units. The formula takes the Total Fixed Cost and divides by the number of units, (Formula AFC = TFC/Q) – note that there is no AFC when you produce zero units, hence the first coordinate is at 1 unit! Below is a table and a graph of the AFC: Since we start with the total fixed cost and spread this number amongst an increasing number of units, the AFC becomes smaller and smaller. As the name implies it is calculated by using the total fixed cost discussed previously and determining the average cost per unit. The Average Fixed Cost is the first cost per unit curve that we shall analyze. This section discusses the cost per unit function, how much does every unit cost?
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