Fixed Cost Curve

The fixed cost curve is a graphical representation of the relationship between total fixed cost and the level of output. The total fixed cost curve is a horizontal line because the total fixed cost doesn't change with the change in the level of output. It is also known as horizontal or flat curve. The fixed costs are those costs, which remain constant regardless of the level of output. For example, rent, salaries, and insurance.

Explanation

The fixed cost curve is horizontal because the total fixed cost remains constant at all levels of output. It means that whether the company produces one unit of output or a thousand units of output, the total fixed cost remains the same. The reason behind this is that fixed costs are those costs that don't change with the level of output. For example, if the rent of the factory is $10,000 per month, it will remain the same whether the company produces 100 units or 1000 units.

Characteristics of Fixed Cost Curve

The fixed cost curve has some characteristics which are as follows:

1. Horizontal Line: The fixed cost curve is a horizontal line, which means the total fixed cost remains constant at all levels of output.

2. Starts from the Origin: The fixed cost curve starts from the origin because the total fixed cost is zero when the company doesn't produce anything.

3. Parallel to X-axis: The fixed cost curve is parallel to the X-axis because the total fixed cost doesn't change with the change in the level of output.

4. No Slope: The fixed cost curve has no slope because the total fixed cost doesn't change with the level of output.

Conclusion

In conclusion, the fixed cost curve is a horizontal line that shows the relationship between the total fixed cost and the level of output. The total fixed cost remains constant at all levels of output, which is the reason behind the horizontal curve. The fixed cost curve is one of the essential concepts in economics, and it helps companies to determine their fixed costs and calculate their breakeven point.