Average variable cost

[Image:Shortruncostcurves.jpg|thumb|400px|right|Short-run cost curves.
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In economics, average variable cost is a firm's variable costs divided by the quantity of output produced :
Average variable cost plus average [fixed cost] equals average total cost :
A firm would choose to shut down if the price of its output is below average variable cost at the profit-maximizing level of output. Producing anything would not generate revenue significant enough to offset the associated variable costs; producing some output would add losses to the costs inevitably being incurred. By not producing, the firm loses only the fixed costs.
As a result, the firm's short-run supply curve has output of 0 when the price is below the minimum AVC and jumps to output such that for higher prices, where denotes marginal cost.