Question

Identify the fixed cost from the following

Answer 1

Cost →

The expenditure incurred by the producer explicitly and implicitly on the use of factor as well as non - factor inputs is called cost .

In short run production function costs have two components :-

1. Fixed cost .
2. Variable cost .

It means that :-

TC = TVC + TFC .

Fixed cost →

It refers to the expenditure incurred by the producer on the use of fixed factors of production.

These costs are also called supplementary cost or overhead cost or indirect cost .

Examples of Fixed costs :-

• Expenditure on machine or plant.
• Expenditure on building or land .
• License fee .
• Wages of permanent staff .

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✧ Fixed cost always remains fixed during the whole process of production .

✧ It is incurred even when production is zero .