Given below are two statements:
Statement I: In the long run, the total cost and the total variable cost coincide, as there are no fixed costs.
Statement II: In the long run, the total fixed cost curve of a firm is a horizontal straight line.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Statement I is correct but Statement II is incorrect.
Statement I: In the long run, the total cost and the total variable cost coincide, as there are no fixed costs. — True. All inputs are variable in the long run, so all cost is variable cost.
Statement II: In the long run, the total fixed cost curve of a firm is a horizontal straight line. — False. There is no fixed cost in the long run, so there is no TFC curve. The horizontal TFC line belongs to the short run.
NCERT (2026-27): “3.7.2 Long Run Costs In the long run, all inputs are variable. There are no fixed costs. The total cost and the total variable cost therefore, coincide in the long run. Long run average cost (LRAC) is defined as cost per unit of output, i.e. …” “Shapes of the Short Run Cost Curves … Figure 3.3 illustrates the shapes of total fixed cost, total variable cost and total cost curves for a typical firm. We place output on the x-axis and costs on the y-axis. TFC is a constant which takes the value c1 and does not change with the change in output. It is, therefore, a horizontal straight line cutting the cost axis at the point c1.” |