In this, if production will be decreased then it will automatically decrease the quantity. Then how can the variable cost remain constant? Variable cost somewhere depends upon the quantity, right?
Shrutiagr2002Beginner
Effect of Production on manufacturing plant’s per unit
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Yes your are right,
Average variable cost of output should increase as output decreases.
So, according to you, what should be the answer to above question?
How can AVC remain fairly constant?
The answer would be C.
as the production is decreased, so as the quantity is also decreased.
but the AVC i.e Variable Cost per unit of output would always be constant, irrespective of the quantity produced, as it is per unit of output.
So, Even if the Quantity Increased / Decreased the AVC would always be constant.