Question

Total Cost (TC) equals:

• A. Total Fixed Cost (TFC) + Total Variable Cost (TVC)
• B. Average Fixed Cost (AFC) + Average Variable Cost (AVC)
• C. Total Fixed Cost (TFC)
• D. Total Variable Cost

Hint:

At a zero level of production, variable cost is zero (\(TVC = 0\)).
This means the firm's total cost is equal to its total fixed cost (\(TC = TFC\)).

Answer 1

The Correct Option is A

Step 1: Understanding the Concept:
In cost theory, the total cost of production is divided into two main categories based on whether they vary with the level of output.
Key Formula or Approach:
The total cost (\(TC\)) equation is: \[ TC = TFC + TVC \]

Step 2: Detailed Explanation:
- Total Fixed Cost (TFC): Costs that do not change with the volume of production (e.g., land rent, depreciation of equipment, permanent salaries).
- Total Variable Cost (TVC): Costs that vary directly with output levels (e.g., feed, seed, fuel, and temporary labor).
The sum of these two components gives the Total Cost (TC) incurred at any given level of output.

Step 3: Final Answer:
Therefore, Total Cost (TC) equals Total Fixed Cost (TFC) plus Total Variable Cost (TVC).