Question

With the increase in production the difference between total and total fixed cost

• A. remains constant
• B. increases
• C. decreases
• D. both increases and decreases

Hint:

The gap between Total Cost and Total Fixed Cost is simply the Total Variable Cost, which always rises with production.

Answer 1

The Correct Option is B

The formula for Total Cost (TC) is: \[ TC = \text{Total Fixed Cost (TFC)} + \text{Total Variable Cost (TVC)} \] The question asks for the difference between Total Cost and Total Fixed Cost, which can be found by rearranging the formula: \[ TC - TFC = TVC \] Total Variable Cost (TVC) is the cost that changes with the level of output (e.g., raw materials, wages for production workers). As production increases, TVC increases. Therefore, the difference between total cost and total fixed cost increases.