The total cost (TC) schedule of a firm is given below:
| Output (units) | 0 | 1 | 2 | 3 | 4 |
|---|---|---|---|---|---|
| TC (Rs) | 30 | 50 | 65 | 75 | 90 |
What is the total fixed cost of this firm?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Rs 30
Given:
TC at 0 units = Rs 30
TC at 1 unit = Rs 50
TC at 2 units = Rs 65
At zero output the firm uses no variable inputs, so TVC is zero and TC is just the fixed cost. TFC stays the same at every output.
TFC = TC at 0 units = Rs 30
Option (2) Rs 50 — this is TC at 1 unit, not TFC.
Option (3) Rs 15 — this is the SMC of the 2nd unit (65 − 50).
Option (4) Rs 20 — this is TVC at 1 unit (50 − 30).
NCERT (2026-27): “3.7.1 Short Run Costs … In Table 3.3, we have an example of cost function of a typical firm. The first column shows different levels of output. For all levels of output, the total fixed cost is Rs 20. Total variable cost increases as output increases. With output zero, TVC is zero. For 1 unit of output, TVC is Rs 10; for 2 units of output, TVC is Rs 18 and so on. In the fourth column, we obtain the total cost (TC) as the sum of the corresponding values in second column (TFC) and third column (TVC). At zero level of output, TC is just the fixed cost, and hence, equal to Rs 20. For 1 unit of output, total cost is Rs 30; for 2 units of output, the TC is Rs 38 and so on.” |