Question

Explain the concept of total cost and total revenue.

Answer 1

1. Total Cost (TC):
   Total cost is the total expenditure incurred by a firm on the factors of production required for the production of goods and services. Total cost is the sum of total fixed cost and total variable cost at various levels of output.
   TC = TFC + TVC
   TC = Total cost
   TFC = Total Fixed Cost
   TVC = Total Variable Cost
   Total Fixed Cost (TFC):
   Total fixed costs are those expenses of production which are incurred on fixed factors such as land, machinery, etc.
   Total Variable Cost (TVC):
   Total variable costs are those expenses of production which are incurred on variable factors such as labour, raw material, power, fuel, etc.
2. Total Revenue (TR):
   Total revenue is the total sales proceeds of a firm by selling a commodity at a given price. It is the total income of a firm. Total revenue is calculated as follows:
   Total revenue = Price × Quantity