Describe Total Variable Cost (TVC), Average Fixed Cost (AFC), Average Variable Cost (AVC) and Marginal Cost (MC).
Total Variable Costs (TVC) is incurred on variable factors and it varies with the level of output. If the output is zero, TVC is zero and as output increases, TVC also increases.
Average Variable Cost (AVC) is measured as the ratio of TVC to X and is defined as the total variable cost per unit of output.
AVC = TVC / X
Average Fixed Cost (AFC) is the total fixed cost per unit of output. It is measured as the ratio of TFC to output (X).
AFC = TFC / X
Marginal Cost (MC) is the addition to the total variable cost when additional (extra) unit of a commodity is produced. Since MC is the additional cost, it is in fact addition to variable cost. It does not include fixed cost because MC is zero at zero level of output.