explain the various short run cost with the help of diagram
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The various short run costs are Total Cost, Total Fixed Cost, Total Variable Cost, Avenge Cost, Average Fixed Cost, Average Variable Cost, and Marginal Cost. The following table shows the various types of short run-costs: Calcualtion of TFC, TVC, TC, AFC, AVC, AC and MC. 1. Total Fixed Cost (TFC): It refers to the total money expenses incurred on alt the fixed factors in the short fun. TFC remains constant at all levels of output. Therefore the total fixed cost curve is a horizontal straight line parallel to ‘X’ axis above the origin which indicates that it is never zero. 2. Total Variable Cost (TVC): It refers to the total money expenses incurred on the variable factor inputs in the short-run. Total variable cost is the direct cost of the output because it increases along with the output and remains zero when the output is zero. So, the TVC curves starts from the origin and rises sharply in the beginning, gradually in the middle and stretch again sharply in the end. The nature of this slope is in accordance with the law of variable proportion. The Total Variable Cost is obtained as follows: TVC = TC – TFC 3. Total Cost (TC):It is the aggregate money expenditure incurred by the firm on all the factors to produce a given quantity of output. TC varies in the same proportion as total variable cost because the total fixed cost is constant. The TC curve slope upwards from left to right, above the origin, indicating that, it includes total fixed cost and total variable cost. 4. Average Fixed Cost (AFC): ’ It is the fixed cost per unit of output. In other words, it is average expenses incurred on a single unit of output produced. AFC and output are in inverse relation i.e., AFC will be higher when the output level is less and as the output goes on increasing, AFC starts reducing. When represented in the diagram, AFC curve will have a negative slope which falls very stiffly in the beginning and later on becomes parallel to the X axis. This shows that it is never zero as TFC is never zero. 5. Average Variable Cost (AVC): It is a variable cost per unit of output. It can be calculated by dividing total variable cost by the total unite of output. When this cost is graphically represented, we get a ‘U’ shaped AVC, which shows that the cost will be less as the number of units produced increase, this is because as the number of variable inputs are added in a fixed plant the efficiency will increase and vice versa. AVC = TVC/output or AVC = AC – AFC 6. Average Cost (AC): It is the cost per unit of output produced. It is obtained by dividing total cost by the total output produced i.e, AC = TC/Q or it is also obtained by adding AFC and AVC. If the AC is graphical represented, we get a U shaped curve because of the operation of law of variable proportions. The short run AC curve is also called as ‘Plant Curves’ because it indicates the optimum utilization of a given plant (Industry) capacity. 7. Marginal Cost (MC): It is an additional cost incurred to produce an additional output. In other words it is the net additions to the total cost when one more unit of output is produced. MC=TCn – TCn-1 (Where TCn = Total cost of ‘n’ selected units of output and TCn-1 is total cost of the previous output) Read more on Sarthaks.com - https://www.sarthaks.com/666926/explain-the-meaning-of-various-short-run-costs-with-the-help-of-a-table-and-diagram
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