Question

Explain the shape of total fixed cost curve Give one reason to justify the shape of the curve.

Answer 1

The Total Fixed Cost (TFC) curve is a horizontal straight line parallel to the X-axis. This is because fixed costs remain constant at all levels of output. Whether the firm produces nothing or large quantities, the total fixed cost, such as rent, salaries of permanent staff, etc., does not change. Hence, the TFC curve shows a flat line indicating the same amount of cost at every level of output.