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Question

Draw total variable cost, total cost and total fixed cost curves in a single diagram, and explain the figure. 


Solution

(i) TC is the sum of TVC and TFC.
(ii) TC and TVC curves are parallel to each other.
(iii) TFC curve is parallel to x-axis. TFC is constant at all levels of output. TVC is zero at zero level of output and with increase in output, TVC also increases. Therefore, TC also increases.

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