Final answer:
Variable costs vary with production levels and average variable cost is calculated by dividing total variable cost by output, often showing a U-shaped curve. Marginal cost behaves differently, with the cost of the first unit equaling total cost.
Step-by-step explanation:
The question asks whether variable costs remain constant in the short-run regardless of the output produced. In truth, variable costs change with the level of output since they are costs associated with variable inputs, like labor and raw materials. We define variable costs as costs that vary directly with the level of production. To calculate the average variable cost (AVC), we divide the total variable cost by the total output at each level of production, typically revealing a U-shaped curve in relation to quantity produced.
It is important to distinguish that marginal cost and variable cost behave differently. The marginal cost of the first unit of output is equal to the total cost because, at zero production, total cost consists entirely of fixed costs. As production increases, marginal costs will generally increase after a certain point due to the law of diminishing returns. However, if the AVC is lower than the market price, the firm could make profits, excluding fixed costs from the consideration.