Question

Explain the nature and shape of the curves of total fixed costs.

Answer 1

Nature:

• Total Fixed Cost refers to the cost that does not change with the level of output.
• It remains constant regardless of whether the output is zero or maximum.
• Examples include rent, salaries of permanent staff, insurance, and depreciation.

Shape of the TFC Curve:

• The TFC curve is a horizontal straight line parallel to the X-axis (output axis).
• This represents that TFC is constant at all levels of output.