The cost that a firm incurs to employ its fixed inputs is called:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Total fixed cost
Fixed inputs must be paid for whatever the output. The cost of employing them is the total fixed cost (TFC).
NCERT (2026-27): “3.7.1 Short Run Costs We have previously discussed the short run and the long run. In the short run, some of the factors of production cannot be varied, and therefore, remain fixed. The cost that a firm incurs to employ these fixed inputs is called the total fixed cost (TFC). Whatever amount of output the firm produces, this cost remains fixed for the firm. To produce any required level of output, the firm, in the short run, can adjust only variable inputs. Accordingly, the cost that a firm incurs to employ these variable inputs is called the total variable cost (TVC). Adding the fixed and the variable costs, we get the total cost (TC) of a firm …” |