The Fixed capital of the firm,eg, equipment, machinery, building etc. is part of the fixed cost. The cost that does not vary with the change in output is called FIXED COST.
VARIABLE COST is the cost that varies with output. For eg. labour, raw materials, fuel, power. As the output increases the variable cost also increases.
Total cost= Total Fixed Cost+ Total Variable Cost.
OR
TC= TFC+ TVC
TFC is constant and this cost is born by the producer even if his production is zero. Therefore, this curve is parallel to x axis.
TVC is a rising curve because as the output increases there is more requirement for variable input.
TC is the total of both TFC and TVC.
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