![]() The total variable cost rises with the increase in output and falls with the decrease in output. These costs, which a firm incurs on variable factors, change with the increase and decrease in the output as they are directly dependent on them. Total variable costs are costs incurred by a firm on the variable factors of production. It has also been called prime costs of production by Professor Alfred Marshall, known as the father of microeconomics. Now, let us look at the total variable cost and the total variable cost formula. Total Fixed Cost= Total Cost of Production – Total Variable Cost They are also called overhead costs because they are usually over and above the usual production expenses. They include payments like rent for land or building, interest paid on borrowed money, insurance charges, property tax, depreciation, maintenance, expenditures, wages, salaries of the permanent staff, etc. They are to be incurred by a firm even when the production is temporarily stopped. ![]() These costs, which a firm incurs on fixed factors, do not change with the increase or decrease in output, independent of the output level. Total fixed cost is costs incurred by a firm on fixed factors of production. It is also called supplementary costs of production by Professor Alfred Marshall, known as the father of microeconomics. ![]() 200, and the total cost of producing three units of the same commodity is Rs. For example, the total cost for producing two units of a commodity is Rs. It is calculated by dividing change in total cost by change in the total quantity of output. Marginal cost refers to the net addition made to the total cost by producing one more output unit.For example, the cost of production for two units of a commodity is Rs. It can be calculated by dividing the total cost and the whole quantity of output. Average cost: it refers to the total production cost per unit.Total cost is the sum of total fixed cost and total variable cost at various output levels. The total cost can be understood as the maximum expenditure incurred by a company on the factors of production required for the production of goods and services.The expenses incurred by these inputs, like raw material, labour, machinery, taxes, etc., are called costs. Concept of Costįor a business or firm to run, it needs a lot of input. When we add total fixed cost and total variable cost, we get the total cost of production. Total fixed cost and total variable cost are two types of production costs, meaning that a firm incurs these costs to produce goods and services. The expenditure incurred on the said inputs is comprehended as production or production costs. They have to make payments for these inputs. When entrepreneurs start production, they have to employ different inputs such as labour, capital, raw material, etc. The concept of total fixed and variable costs comes under the product pricing part of microeconomics.
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