If the average total cost is 54, total fixed cost is 45000 and quantity produced is 2500 units, find the average variable costs (in ) of the firm :

The standard method of calculating average variable cost is to divide total variable cost by the quantity, illustrated by this equation :

Average Variable Cost = Total Variable Cost/ Quantity of Output

An alternative specification for average variable cost is found by subtracting average fixed cost from average total cost :

Average Variable Cost = Average Total Cost – Average Fixed Cost

According to question,

Average Total Cost = 45000/2500 = 18

So Average Variable Cost = 54 – 18= 36