Class 12 Micro Economics - Chapter Production and Costs NCERT Solutions | What are the total fixed cost, total var
What are the total fixed cost, total variable cost and total cost of a firm? How are they related?
Total Fixed Cost: This refers to the costs incurred by a firm in order to acquire the fixed factors for production like cost of machinery, buildings, depreciation, etc. In short run, fixed factors cannot vary and accordingly the fixed cost remains the same through all output levels. These are also called overhead costs. Total Variable Cost: This refers to the costs incurred by a firm on variable inputs for production. As we increase quantities of variable inputs, accordingly the variable cost also goes up. It is also called Prime cost or Direct cost and includes expenses like -wages of labour, fuel expenses, etc.
Total Cost (TC): The sum of total fixed cost and total variable cost is called the total cost.
Total cost = Total fixed cost + Total variable cost
TC = TFC + TVC Relationship between TC, TFC, and TVC:
1) TFC curve remains constant throughout all the levels of output as fixed factor is constant in short run.
2) TVC rises as the output is increased by employing more and more of labour units. Till point Z, TVC rises at a decreasing rate, and so the TC curve also follows the same pattern.
3) The difference between TC and TVC is equivalent to TFC.
4) After point Z, TVC rises at an increasing rate and therefore TC also rises at an increasing rate.
5) Both TVC and TFC is derived from TC i.e. TC = TVC + TFC
More Questions From Class 12 Micro Economics - Chapter Production and Costs
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What is the total product of input?
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When does a production function satisfy decreasing returns to scale?
- Q:-
Let the production function of a firm be Q=5L1/2K1/2Q=5L1/2K1/2 Find out the maximum possible output that the firm can produce with 100 units of LL and 100 units of KK.
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Why does the SMC curve cut the AVC curve at the minimum point of the AVC curve?
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What do the long-run marginal cost and the average cost curves look like?
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What does the average fixed cost curve look like? Why does it look so?
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Explain the relationship between the marginal products and the total product of an input.
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The following table gives the total product schedule of labour. Find the corresponding average product and marginal product schedules of labour.
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What are the average fixed cost, average variable cost and average cost of a firm? How are they related?
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Popular Questions of Class 12 Micro Economics
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(a) A positively sloped straight line passing through the origin?
(b) A horizontal line?
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From the schedule provided below calculate the total revenue, demand curve and the price elasticity of demand:
Quantity
1
2
3
4
5
6
7
8
9
Marginal
Revenue
10
6
2
2
2
0
0
0
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Recently Viewed Questions of Class 12 Micro Economics
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How is the optimal amount of labor determined in a perfectly competitive market?
- Q:-
Suppose the demand and supply curves of salt are given by:
(a) Find the equilibrium price and quantity.
(b) Now, suppose that the price of an input that used to produce salt has increased so, that the new supply curve is qs = 400 + 3p
How does the equilibrium price and quantity change? Does the change conform to your expectation?
(a) Suppose the government has imposed at ax of Rs 3 per unit of sale on salt. How does it affect the equilibrium rice quantity?
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How are equilibrium price and quantity affected when income of the consumers
a) Increase
b) Decrease
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In what respect do the supply and demand curves in the labor market differ from those in the goods market?
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Suppose the demand and supply curve of commodity XX in a perfectly competitive market are given by:
qD =700 - p
qs = 500 + 3p for p ≥ 15
= 0 or 0 ≤ p <15
Assume that the market consists of identical firms. Identify the reason behind the market supply of commodity X being zero at any price less than Rs 15. What will be the equilibrium price for this commodity? At equilibrium, what quantity of X will be produced?
- Q:-
Considering the same demand curve as in exercise 22, now let us understand for free entry and exit of the firms producing commodity X. Also assume the market consists of identical firms producing commodity X. Let the supply curve of a single firm be explained?
q*= 8+3p for p ≥ 20
= 0 for 0 ≤ p ≤ Rs 20
(a) What is the significance of p =20?
(b) At what price will the market for X be in equilibrium? State the reason for your answer.
(c) Calculate the equilibrium quantity and number of firms.
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At what level of price do the firms in a perfectly competitive market supply when free entry and exit is allowed in the market? How is the equilibrium quantity determined in such a market?
- Q:-
Explain through a diagram the effect of a rightward shift of both the demand and supply curves on equilibrium price and quantity.
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