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MCQ
Identify the two cost curves which start from the same point on the Y-axis.
Options
TVC and TFC
TFC and TVC
TFC and TC
TFC and AFC
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Solution
TFC and TC
Explanation:
The total fixed cost and total cost are two cost curves that start at the same location on the Y-axis. TFC and TVC are added together to form TC. Because TVC is 0 at the zero level of output, it begins at the origin. TC = TFC and starts from the same place on the y-axis at the zero level of output.
Concept: Demand
Is there an error in this question or solution?
As an expert in economics and cost analysis, it's evident that the provided information regarding cost curves is accurate and well-founded. My depth of knowledge in this field allows me to confidently explain the concepts involved in the question and solution.
The question revolves around cost curves, specifically Total Fixed Cost (TFC), Total Variable Cost (TVC), and Total Cost (TC). Let's break down the concepts used in the article:
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Total Fixed Cost (TFC):
- TFC is the cost that does not vary with the level of production or output. It remains constant regardless of the quantity produced. In the context of the question, TFC is represented on the Y-axis.
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Total Variable Cost (TVC):
- TVC is the cost that varies in direct proportion to the level of production. It increases as production increases and decreases as production decreases. The question notes that TVC is 0 at the zero level of output, indicating that there are no variable costs when there is no production.
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Total Cost (TC):
- TC is the sum of TFC and TVC. Mathematically, TC = TFC + TVC. The article correctly states that TFC and TC start from the same point on the Y-axis. This is because, at zero output, TVC is 0, and TC is equal to TFC.
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Average Fixed Cost (AFC):
- AFC is calculated by dividing TFC by the level of output. It represents the fixed cost per unit of output. In the context of the question, AFC is not explicitly mentioned, but it's a relevant concept in cost analysis.
In summary, the question and solution accurately describe the relationship between TFC, TVC, and TC, emphasizing that TFC and TC start from the same point on the Y-axis. The concepts discussed align with the principles of cost analysis in economics. There doesn't appear to be an error in the question or solution based on the information provided.
