Question

what is the difference between average total cost and average variable cost ? give an example

Answer 1

AVERAGE VARIABLE COST

The average variable cost (AVC) is the total factor cost per unit. Or in other words it is calculated by dividing the total cost by quantity of output. Where AVC curve is u-shaped. The variable cost of producing 50 phones is 400, so the average variable cost is 400/50, or 8 per phone. As you can see in the figure 2. Thus, the explanation is that average total cost include normal variable expense and normal fixed expense. therefore, for q=50 phones, the normal all out expense is 12 for every phone, while the average variable cost is 8 for each phone. Anyway the output develops fixed cost become generally less significant (since they don't ascend with output), so average variable cost sneaks nearer to average expense.

AVERAGE TOTAL COST

average total cost stars off moderately high, because at low degrees of output all out expenses are overwhelmed by the fixed cost. numerically denominator is small to such an extent that average cost is huge. average total cost at that point decreases, as the fixed expense are spread over an expanding amount of output.As figure shows, if the cost of producing 300 phones is 25 dollar which means 300/25= 12 dollar.

NOTE :THERE IS ONE DIFFRENCE BETWEEN THE AVERAGE TOTAL COST AND AVERAGE VARIABLE COST IS AVERAGE FIXED COST AS WE KNOW AVERAGE FIXED COST REMAINS CONSTANT.