Question

Explain the shape of the total variable cost with the help of a diagram.

Explain the shape of the total variable cost curve.

Answer 1

Total Variable Cost (TVC) is the total expenditure a firm makes on variable inputs. TVC changes directly with the level of output; it rises as output increases and falls as output decreases. However, the rate at which TVC increases is not uniform throughout.

The TVC curve is concave downward up to the OQ level of output, showing that the cost rises at a diminishing rate initially. After the OQ level, the curve becomes concave upward, meaning that the cost rises at an increasing rate.

The TVC curve begins from the origin, which shows that when output is zero, TVC is also zero.