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Production and cost — Economics STD 12 Humanities & Commerce — Question

Rajasthan BoardEnglish MediumSTD 12 Humanities & CommerceEconomicsProduction and cost3 Marks
Question
Distinguish between variable cost and fixed cost. Give two examples of each.
✓

Answer

S No.
Total Variable Costs
Basis
Total Fixed Costs
1.
The cost incurred on variable factors of production is known as TVC.
Meaning
Fixed cost are those costs of production that do not change with a change in output.
2.
It can be changed in the short run.
Changed
It cannot be changed in the short run.
3.
It is zero when there is no production.
Cost at zero output
It can never be zero even if there is no production.
4.
It is incurred on variable factors like labour, raw material etc.
Factors of Production
It is incurred on fixed factors like land, buildings etc.
5.
TVC is inversely S-shaped as variable cost initially increases at a diminishing, and then increases at an increasing rate.
Shape of the curve
TFC is a straight line parallel to the X-axis as fixed cost remains the same at all levels of output.
6.
Wages of casual labour, payment for raw material, etc.
Example
Salary of permanent staff, insurance premium, building rent, etc.

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