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Question
What happens to the difference between Total Cost and Total Variable Cost as output is increased?
Solution
Total cost (TC) is the sum of total fixed cost (TFC) and total variable cost (TVC) corresponding to a given level of output. Hence, the difference between the TC and TVC is TFC. This fixed cost is a must to receive the services of the fixed factors of production. These factors of production remain constant because it does not vary in the short run. Hence, the TC and TVC remain constant even though there is an increase in the production level.
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Cost - Total Cost
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Complete the following table:
| Output units | Total cost Rs | Average variable cost Rs | Marginal cost Rs | Average fixed cost Rs |
| 0 | 30 | |||
| 1 | - | - | 20 | - |
| 2 | 68 | - | - | - |
| 3 | 84 | 18 | - | - |
| 4 | - | - | 18 | - |
| 5 | 125 | 19 | - | 6 |
