Livestock Economics, Marketing and Business Management

UNIT COSTS

• Unit costs are average fixed cost (AFC), average variable cost (AVC), average total cost (ATC or AC) and marginal cost (MC).
• These unit cost curves are more important than total costs in decision-making process.

Average fixed cost (AFC)

• It is worked out by dividing the total fixed cost by the amount of output.
• Hence as output increases, average fixed cost (AFC) continues to decline.

AFC = TFC/Y

Average variable cost (AVC)

• It is worked out by dividing the total variable cost by the amount of output.
• Average variable cost decreases, reaches a minimum and increases thereafter.

AVC = TVC/Y

• Shut down point is the output level corresponding to minimum point of average