# Quiz 7: Production, Inputs, and Cost: Building Blocks for Supply Analysis

Total fixed cost of the firm remains same for the production of any amount of goods. Average variable cost diminishes as the production of goods increases. Average fixed cost is equal to total fixed cost divided by quantity. Total fixed cost is \$360,000 and one has to calculate the average fixed cost. It can be shown with the help of following table. In the above table, one has taken output from zero to six. Total fixed cost is remained same for every quantity of output. Average fixed cost is calculated by: With the help of given table one can draw the graph to show the total fixed cost and average fixed cost curves as follows. The above figure indicates that TFC curve is horizontal straight line considering that the fixed cost is constant. AFC curve slopes downward because AFC declines as the output increases.
Average variable cost is calculated by considering the total variable cost and the quantity. Marginal variable cost is equal to change in total variable cost divided by change in the quantity. The following is a measurement of average variable cost and marginal variable cost. In the above table, one has calculated the AVC and MVC with the help of given information. Both AVC and MVC increase as the quantity of production increases. The following is graphical representation of the average variable cost, total variable cost, and marginal revenue cost curves. In the above diagram, one has taken quantity on x-axis and TVC, AVC, and MVC on the y-axis. TVC slopes upward to the right because variable cost increases as output increases. AVC and MVC are constant at initial stage and then both slopes upward. Marginal cost is equal to marginal fixed cost plus marginal average cost. Marginal fixed cost are always zero, therefore the marginal variable cost equals marginal cost. Symbolically, Therefore, marginal cost is equal to marginal variable cost.