Anjali, we know that
TC= TVC + TFC
Now, since the TFC is always positive even at zero level of output, TC can never be negative. This is because total cost includes total fixed cost as one of its component. And, since, TCis always positive, it never starts from origin.
As an avid scholar deeply entrenched in the realms of economics and business, my passion and expertise lie in unraveling the intricacies of cost analysis and production theory. With a comprehensive understanding of these subjects, I aim to shed light on the concepts discussed in the article, providing a nuanced perspective backed by first-hand knowledge.
The assertion made in the article revolves around the cost structure in economics, specifically the relationship between total cost (TC), total variable cost (TVC), and total fixed cost (TFC). Let me substantiate this with evidence and a thorough grasp of the concepts at hand.
Firstly, the equation presented, TC = TVC + TFC, is a fundamental expression in cost accounting. It stems from the fact that total cost is the sum of total variable cost and total fixed cost. This equation forms the basis for understanding how costs vary with changes in production levels.
Total Variable Cost (TVC) represents costs that vary with the level of output. Examples include raw materials, direct labor, and other variable inputs. These costs fluctuate based on the quantity of goods or services produced.
Total Fixed Cost (TFC), on the other hand, encompasses costs that remain constant regardless of the level of production. These costs include expenses like rent, salaries of permanent staff, and other fixed overheads. TFC exists even when the production output is zero.
Now, the article asserts that TC can never be negative, primarily due to the presence of TFC. This assertion aligns with the nature of total fixed cost. TFC is constant and does not change with output; therefore, it ensures that the total cost, which includes both TVC and TFC, remains positive even at zero levels of production.
Furthermore, the claim that TC never starts from the origin is grounded in the fact that total cost includes total fixed cost. Since total fixed cost is a positive constant, it imparts a positive starting point to the total cost curve. This is a crucial concept in cost analysis, illustrating that costs are incurred even when production is at its minimal level.
In summary, the article delves into the foundational principles of cost analysis, emphasizing the roles of total variable cost and total fixed cost in shaping the total cost curve. The assertion that TC can never be negative is substantiated by the perpetual existence of total fixed cost, highlighting the importance of these concepts in understanding economic and production dynamics.
