what are the total fixed cost, total variable cost and total cost of a firm? How are they related?
Answers
Answer :
Total Fixed Cost ( TFC )
The total cost incurred by the producer for the purchase of fixed inputs is called Total Fixed Cost.
Total Variable Cost ( TVC )
The total cost incurred by the producer on variable inputs is called Total Variable Cost.
Total Cost ( TC )
Total cost is the sum total of all costs incurred by the producer to produce goods and services.
TC = TFC + TVC
Relation Through Diagrams :
Look the Attachment ;
There, Output and cost are marked on x and y axis. TFC curve is parallel to x-axis. TVC curve starts from the origin because when output is zero TVC is also zero. Both TVC and TC curves are sloping upwards. They have an inverted 'S' shape. TVC curve starts from 0 and slowly increases, then rises rapidly. When output is zero, TVC also zero.TC begins from Point F where TFC cuts y axis. TC also increases slowly and then rises rapidly as Output increases.
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