TC curve

• Fixed costs do not vary with output
• The total fixed cost curve is a horizontal line because fixed costs are constant over a range of output.
• What does the total fixed cost curve look like?

  Horizontal line
• The shape of the total variable cost curve is influenced by the law of diminishing marginal returns.
• The total variable cost curve initially becomes less steep because of productivity
• Steps in the law of diminishing marginal returns

  1️⃣ Add a variable factor of production (labor)

  2️⃣ Total output rises

  3️⃣ Total output starts to fall
• Why does the total variable cost curve become shallower initially?

  Productivity gains
• Diminishing returns occur when fixed factors become a constraint on production
• Decreasing returns to labor lead to a steeper total variable cost curve.
• What is the equation for total cost?

  TFC + TVC</latex>
• The total cost curve follows the shape of the total variable cost curve.
• Match the cost type with its characteristic:

  Total fixed cost ↔️ Constant at all output levels

  Total variable cost ↔️ Changes with output

  Total cost ↔️ Sum of TFC and TVC
• The vertical distance between the total cost curve and the total variable cost curve represents total fixed costs.
• What does the vertical distance between the total cost curve and the total variable cost curve measure?

  Total fixed cost
• At zero output, the total cost is equal to total fixed cost.