Total Cost, Fixed Cost and Variable Cost curves

Fixed Cost - is the cost of fixed factors of production. Fixed Cost remains the same in the short run.

Variable Cost - is the cost of variable factors of production. Variable Cost increases with the increase in the quantity of production.

TC = TFC + TVC

(Total cost = Total Fixed Cost + Total variable Cost)

Consider a factory where factory is a fixed factor and the workers are variable factor.

Workers ( variable factor)	Output	Fixed cost ( cost of factory)	Variable Cost (wages of workers)	Total Cost = FC + VC
0	0	40	0	40
1	50	40	10	50
2	90	40	20	60
3	120	40	30	70
4	140	40	40	80
5	155	40	50	90
6	165	40	60	100

Drawing these points on a graph, the curves will be -

· Fixed cost remains the same at all levels of output.

· As the output increases, TC and Variable Cost increases.

· TC = FC + VC