Average Variable Cost and Output

Average variable costs mean the total variable costs divided by the number of units produced. The Average variable costs will come down and then rise as more and more units are produced with a given plant. This is because as we add more units of variable factors in a fixed plant, the efficiency of the […]

As output rises, the Average fixed cost (AFC) goes on declining

The AFC curve is therefore an onward sloping curve. (ii) As output approaches Zero, average fixed cost approaches infinity, but AFC curve never touches the Y-axis. On the other hand, as output reaches very high levels, average fixed cost approaches zero, but it never reduces itself to zero, it always remains positive. Hence the AFC […]

Total Costs

 Total cost means the total cost of producing any given amount of output. When we ass total fixed and total variable costs at different rates of output, we get the corresponding total costs. Thus, TC = TFC + TVC Since, fixed cost are constant and variable costs necessarily rise as output rises, total costs also […]

Total Variable Cost (TVC)

The costs that directly with the output, rising as more is produced and falling as less is produced, are called total variable costs. They are also referred as prime costs or Direct costs or Avoidable costs, Example of variable costs are: (i) wages of temporary laborers; (ii) raw material; (iii) fuel; (iv) Electric power, etc. […]

Total Fixed Cost (TFC)

Total fixed Costs are those costs that not vary with the output. They will be the same if output is zero or units or 1 million units. Thus, they are totally unaffected by the changes in rate of outputs. Examples of fixed costs are: (i) Initial establishment expenses, (ii) Rent of the factory, (iii) Expenses […]

TYPES OF COSTS

There are many different types of costs that a firm may consider relevant for decision-making under varying situations. The manner in which costs are classified or defined is largely dependent on the purpose for which the cost data are being outlined. Explicit and Implicit Costs: The opportunity cost (or cost of the foregone alternative) of […]