Its position reflects the amount of fixed costs, and its gradient reflects variable costs. The total cost (TC) curve is found by adding total fixed and total variable costs. The total variable cost (TVC) curve slopes up at an accelerating rate, reflecting the law of diminishing marginal returns. Given that total fixed costs (TFC) are constant as output increases, the curve is a horizontal line on the cost graph. Plotting this gives us Total Cost, Total Variable Cost, and Total Fixed Cost. Total variable costs (TVC) will increase as output increases. The total fixed costs, TFC, include premises, machinery and equipment needed to construct boats, and are £100,000, irrespective of how many boats are produced. Consider the following hypothetical example of a boat building firm.
0 Comments
Leave a Reply. |