Question

How to calculate tfc?

Answer 1

TFC or Total Fixed Cost is the cost that the producer has to incurr, regardless of the number of goods he produces.

For example, Mr. A is a manufacturer of pens and run his factory on a rented land. Let's say the rent was Rs. 10,000. In one month, he produces 400 pens but in another month, he produces 1000 pens.

But, in both months, he has to pay the fixed rent of Rs. 10,000.

In this example, Rs. 10,000 is the fixed cost.

It can be calculated by using either of the two formulas:

TFC = TC - TVC

(Total Cost - Total Variable Cost)

OR

TFC = AFC*Q

(Aveage Fixed Cost * Output)