. What is fixed cost? How would you calculate Fixed cost in a graph?
Total Cost has two components in the short run
1)Total Fixed Cost and
2)Total Variable Cost .
Each type of these two costs are explained below :
Fixed Cost : The cost incurred on the fixed factors of production such has plant , machineries , buildings etc are called fixed costs . These costs remain the same in the short run irrespective of the amount of output produced .The total fixed cost curve is a straight horizontal line parallel to the axis measuring the output indicating that is the same for all units of output produced .Even if no output is produced , the producer has to incur the fixed cost of production .
Variable Cost: The cost incurred on the variable factors of production such as labor , raw materials etc. are called the variable costs . With the increase in the level output of output produced , the variable cost of production also increases . When no output is produced , the variable cost of production is zero .
Below we have shown the calculation of Total Fixed Cost graphically :
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