Study the table below and answer the question.
| Output | TFC | TVC | TC |
| 0 | 20 | 0 | 20 |
| 1 | 20 | 10 | 30 |
| 2 | 20 | 18 | 38 |
| 3 | 20 | 24 | 44 |
| 4 | 20 | 29 | 49 |
| 5 | 20 | 33 | 53 |
| 6 | 20 | 39 | 59 |
Assertion: Total fixed cost, however, is independent of the amount of output produced and remains constant for all levels of production in the short run.
Reasoning: The shape of TFC curve is a horizontal straight line where we place costs on the x-axis and output on the y-axis.
Answer & explanation
Correct answer: option 3
The correct answer is option 3: Assertion (A) is true but Reasoning (R) is not correct.
Assertion: Total fixed cost, however, is independent of the amount of output produced and remains constant for all levels of production in the short run. This is correct.
- Total Fixed Cost (TFC) refers to costs that do not change with the level of output in the short run.
- These costs remain constant regardless of whether the firm produces zero output or maximum output.
- Examples include rent, salaries of permanent employees, and depreciation of machinery.
- Therefore, the assertion correctly states that TFC is independent of the amount of output produced and remains constant in the short run.
Reasoning: The shape of TFC curve is a horizontal straight line where we place costs on the x-axis and output on the y-axis. Incorrect — although TFC is a horizontal straight line, the axes are wrongly stated; output is on the x-axis and cost is on the y-axis.