Question

Q.9.Explain the relation between the total cost, fixed cost and variable cost.​

Answer 1

Fixed costs are expenses that must be paid regardless of the amount of production (e.g. rent, utilities, salaries…).

Variable costs are expenses directly associated with the production of each unit of output (e.g. raw material costs, packaging).

Total cost is the sum of fixed plus variable costs.

Fixed costs per unit of production continually decrease while variable costs per unit of production remain constant in the short run. In the long run, all costs are variable.

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Answer 2

Explanation:

Fixed cost- They are those factors of production which does not change with the change in output.

They remain constant even in the production increases of falls down.

For eg- Factory rent

Variable Cost- They are those factors which are dependent on level of output.

Eg- Labour, Raw material

Total Cost- It is the sum total of FC and VC

therefore,

TC= TFC+TVC