Question
Explain that area under marginal bar cost (MC) is total variable cost (TVC).
✓
Answer
As we know that MC is addition to the total variable cost when an additional unit is produced. This means that total variable cost (TVC) is the sum of marginal cost, since total fixed cost remains the same. This is proved with the help of given figure. Assuming output at OQ, an imaginary marginal cost (MC) is drawn in diagram. Thus, under assumption of marginal cost curve, total variable cost (TVC) is equal to the area under marginal cost curve. For example, at OQ units of output, TVC is equal to the shaded area OPEQ. It can be explained with the help of the following table.
|
Units of Commodity
|
MC
|
$\text{TVC}=\sum\text{MC}$
|
|
0
|
0
|
0
|
|
1
|
30
|
30
|
|
2
|
10
|
40
|
|
3
|
15
|
55
|
|
4
|
30
|
85
|
|
5
|
35
|
120
|
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Output(Units)
|
1
|
2
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3
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4
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5
|
6
|
7
|
|
Price (Rs.)
|
24
|
24
|
24
|
24
|
24
|
24
|
24
|
|
Total Cost (Rs.)
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26
|
50
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72
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92
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115
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139
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165
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