Column (3) of Table 7-1 shows variable cost (VC). Variable costs are those ‘which vary as output changes .. Examples include materials required to produce output (such as steel 10 produce automobiles), production workers to staff the assembly lines,
power to operate factories, and so on. In a super market, checkout clerks are a variable cost, since angers can adjust the clerks’ hours worked to watch the number of shoppers coming through the By definition, l’r. begins at zero when q is zero the part of TC that grows with output; indeed, Imp in TC between any two outputs is the same e jump in VC’ Why? Because FC stays constant throughout and cancels out in the company of costs between different output levels.
Let us summarize these cost concepts:
Total cost represents the lowest total dollar expense needed to produce each level of output q. TC rises as q rises,
FIXed cost represcnu. the total dollar, expense that is pard om even when no output is produced; fixed cost IS unaffected by any variation in the quantity of output, Variable cost represents expenses that vary with the level of output-such as raw materials, wages, and fuel-and includes all costs that are not fixed. Always, by definition,
TC= FC+ \’C
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