5
Question
Total fixed cost (TFC) curve is ________.
Total fixed cost (TFC) curve is ________.
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Solution
The correct option is A parallel to X-axis
Fixed costs are indirect costs and have to be paid irrespective of the level of production. Thus its value doesn't change with production that's why, when plotted it must be parallel to the X axis. Even if zero output is being produced these costs have to be incurred. These costs include rent of the factory, interest payments on borrowed financial capital, payment on the lease for factory equipment.
Fixed costs are indirect costs and have to be paid irrespective of the level of production. Thus its value doesn't change with production that's why, when plotted it must be parallel to the X axis. Even if zero output is being produced these costs have to be incurred. These costs include rent of the factory, interest payments on borrowed financial capital, payment on the lease for factory equipment.
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