How MC curve detemine the shape of TC and TVC curves.explain?
Introduction:
The MC (Marginal Cost) curve represents the change in total cost (TC) incurred by a firm when producing an additional unit of output. The shape of the MC curve has a direct impact on the shape of the TC and TVC (Total Variable Cost) curves.
Relationship between MC Curve and TC Curve:
The MC curve is derived from the TC curve. The TC curve shows the total cost of producing different levels of output. It is the sum of fixed costs (FC) and variable costs (VC). The shape of the TC curve depends on the behavior of these costs as output changes.
Effect of MC Curve on TC Curve:
1. MC Curve as the Slope of TC Curve:
The MC curve represents the slope of the TC curve at each level of output. If the MC curve is rising, it means that the slope of the TC curve is also increasing. This indicates that the rate of increase in total cost is accelerating as more units of output are produced. Consequently, the TC curve will have a steeper slope.
2. Relationship between MC and TC:
The relationship between MC and TC can be understood through the concept of marginal cost. The MC of producing an additional unit of output is the change in TC divided by the change in quantity. As the MC increases, it implies that the additional cost incurred for each additional unit of output is rising. This leads to a faster increase in TC, resulting in a steeper TC curve.
Effect of MC Curve on TVC Curve:
1. TVC Curve as Part of TC Curve:
The TVC curve represents the total variable cost of producing different levels of output. It is a subset of the TC curve and excludes fixed costs.
2. Relationship between MC and TVC:
Since the MC curve represents the change in TC, it also represents the change in TVC. The TVC curve will have the same shape as the MC curve. If the MC curve is increasing, it implies that the additional cost of variable inputs is rising. Therefore, the TVC curve will have an upward slope.
Conclusion:
The shape of the MC curve determines the shape of the TC and TVC curves. A rising MC curve indicates an increasing rate of cost for each additional unit of output, resulting in steeper TC and TVC curves. Understanding these relationships helps firms analyze their production costs and make informed decisions regarding output levels and pricing strategies.