Page 185 - DECO401_MICROECONOMIC_THEORY_ENGLISH

Microeconomic Theory

Notes
Fig. 9.2

Y
Fixed Costs
12
F C
10
8
Cost (`) 6
4
2
O X
1 2 3 4 5 6 7
Output (in units)

In Fig. 9.2 on OY axis the units of production costs and on OX axis units of output are given. FC line
is bound to reveal the costs. This line is parallel to OX axis. From this it is clear that cost will ramain
fix even the output is low or high. This FC line is touching OY axis at point F. From this it is clear that
output is zero even then bound cost will remain rupees ten.

Total Variable Cost
The variable cost is the cost which is applied in input and output factors of production.

According to Ferguson, “Total variable cost is the sum of amounts spent for each of the variable
inputs used.”
—Ferguson
Self Assessment

Multiple choice questions:
4. Financial cost is different from ............... cost.
(a) ledger Cost (b) curve
(c) straight (d) social
5. Social cost is different from ............... cost.
(a) ledger Cost (b) social
(c) curve (d) personal
6. The implicit cost of production is the ............... cost of ownership and self cost.
(a) factors (b) social
(c) products (d) money
7. The difference between social and personal cost is ...............
(a) external cost (b) implicit cost
(c) private cost (d) rupee cost
8. The total fixed cost does not with quantity of production ...............
(a) fixed (b) variable
(c) changed (d) unchanged

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