#cfa-level-1 #microeconomics #reading-15-demand-and-supply-analysis-the-firm
The rate of increase in total costs declines up to a certain output level and, thereafter, accelerates as the firm gets closer to full utilization of capacity.
The rate of change in total costs mirrors the rate of change in total variable cost.
In
Exhibit 13,
TC at 5 units is 400—of which 300 is variable cost and 100 is fixed cost. At 10 units, total costs are 1,650, which is the sum of 1,550 in variable cost and 100 in fixed cost.
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CostsTotal costs (TC) are the summation of all costs, where costs are classified according to fixed or variable. Total costs increase as the firm expands output and decrease when production is cut. The rate of increase in total costs declines up to a certain output level and, thereafter, accelerates as the firm gets closer to full utilization of capacity. The rate of change in total costs mirrors the rate of change in total variable cost. In Exhibit 13, TC at 5 units is 400—of which 300 is variable cost and 100 is fixed cost. At 10 units, total costs are 1,650, which is the sum of 1,550 in variable cost and 100 in fixed cost.
Total fixed cost (TFC) is the summation of all expenses that do not change when production varies. It can be a sunk or unavoidable cost that a firm has to cover whether it Summary
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