Cost-It refers to the expenditure incurred by a producer on the factor as well as non-factor inputs for a given amount of output of a commodity.
Relation between Marginal Cost and Average Variable Cost:
(i) Both AVC and MC curves are of U-shape. It shows law of variable portion.
(ii) Minimum point of AVC curve (point b) will always right to minimum point of MC (point a).
(iii) When AVC declines, then MC curve is below to AVC.
(iv) When AVC increases, then MC curve will be above to AVC.
(v) When AVC is constant, then MC = AVC (Point b).
(vi) A situation also exists, when AVC declines but MC increases. This stage is between Xa, and Xb output level.