what is the relationship between tvc, tfc and tc
Answers
Answer:
Since the TFC curve is horizontal, the difference between the TC and TVC curve is the same at each level of output and equals TFC. This is explained as follows: TC – TVC = TFC. The TFC curve is parallel to the horizontal axis while the TVC curve is inverted-S shaped.
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Answer:
Relationship between TVC, TFC and TC
Explanation:
Since the TFC curve is horizontal, the difference between the TC and TVC curve is the same at each level of output and equals TFC. This is explained as follows: TC – TVC = TFC. The TFC curve is parallel to the horizontal axis while the TVC curve is inverted-S shaped.
TVC, TC, and TFC curves in a single diagram.
(i) TC is divided into two parts TFC and TVC such that TC = TFC + TVC.
(ii) TFC is the overhead cost and it remains constant or fixed whatever be the level of output. TFC curve is a horizontal line parallel to the x-axis.
(iii) TVC is cost due to increased use of variable factors like raw material, labor, etc. TVC is inverse S-shaped starting from the origin due to law of variable proportion.
(iv) TC is aggregate of TFC and TVC. TC curve is inverse S-shaped starting from the level of fixed cost. The reason behind it shape is the law of variable proportion.
