TC and TFC start from the same point because when zero unit of output is produced, TVC is zero.
We know that,
TFC+ TVC= TCTC
When Output = 0 unit,
TFC+ 0 = TC
TFC= TC
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Now, let's dissect the concepts presented in the provided article related to total cost (TC), total fixed cost (TFC), and total variable cost (TVC).
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Total Cost (TC): Total cost is the overall expense incurred by a firm in producing a specific quantity of output. It encompasses both fixed and variable costs. Mathematically, TC is the sum of total fixed cost and total variable cost (TC = TFC + TVC).
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Total Fixed Cost (TFC): Total fixed cost is the portion of the total cost that remains constant regardless of the level of output produced. In other words, TFC does not vary with the quantity of goods or services produced. It is a fixed commitment that a business must cover even when production is zero.
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Total Variable Cost (TVC): Total variable cost represents the costs that vary in direct proportion to the quantity of output produced. TVC increases as production levels rise and decreases when production decreases. At zero units of output, TVC is theoretically zero, as mentioned in the article.
The article highlights the fundamental relationship between TFC, TVC, and TC when no units of output are produced. The equation TFC + TVC = TC underscores that at zero units of output, TFC equals TC. This is because, with no production, the total variable cost (TVC) is zero, and thus, the total cost (TC) is equal to the total fixed cost (TFC).
Understanding these concepts is crucial for businesses to make informed decisions about production levels, pricing, and overall financial planning. It provides a foundation for cost control and efficiency, enabling businesses to optimize their operations and enhance profitability.
