Question

State the relation between marginal cost and average variable cost.

Answer 1

Average Variable Cost (AVC) and Marginal Cost (MC):
When AVC declines, MC also declines at a faster rate but below the AVC curve.
When AVC increases, MC also increases at a faster rate and remains above the AVC curve.
The MC curve cuts the AVC curve from its minimum point. Also, both AVC and MC are
obtained from TVC.

AVC = ${\displaystyle \frac{\text{TVC}}{Q}}$

${\displaystyle MC=\frac{\text{ΔTC}}{\text{ΔQ}}=\frac{\text{ΔTVC}}{\text{ΔQ}}}$