Question

TVC is an avoidable cost. Give a reason for your answer.

Answer 1

Yes, Total Variable Cost (TVC) is considered an avoidable cost. Total variable cost is incurred only on variable factors such as raw materials, casual wages, fuel and power, which the firm uses only when it produces. If nothing is produced, these expenses are not incurred, so TVC can be avoided by stopping production. Hence TVC is zero at zero output: [TVC = 0 when Q = 0] This is why TVC is also called avoidable cost, unlike TFC, which is unavoidable.