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pls ans the this question

1.why are total cost curve and variable cost curve parallel?

2.define marginal revenue which concept of revenue is called price?

3.how can one obtain tvc from mc?

4.in case of aproduct like disel which sold by the governmentat a subsidised price,how can the government lower its losses without lowering the subsidy?

i. We know that Total Cost is the summation of Total Variable Cost and Total Fixed Cost. That is, 

TC = TVC + TFC  

Total Cost Curve is parallel to Variable cost curve because of the fact that Total Fixed Cost remains constant throughout all levels of output. Thus, the vertical distance between TC and TVC is constant and is equal to TFC.  

ii. Marginal Revenue is defined as the change in the total revenue due to sale of one more unit output. It is calculated by either of the two following ways.

1. MR

 

2. MRn = TRn – TRn–1

where,

MRn represents Marginal Revenue due to nth unit of output

TRn represents Total Revenue of n units of output

TRn–1 represents Total Revenue of n –1 units of output

It is the Average Revenue (i.e. the revenue earned per unit of output sold) that is the same as the price of product.

iii. Total Variable Cost is the sum total of Marginal Cost. That is, the sum total of all the marginal cost of producing ‘n’ units of output is called TVC of producing nth unit of output. Algebraically,

ΣMC = TVC

This is because of the fact that in the short run the fixed factor remains constant, so any additional increase in the cost should be on the cost on the employing an additional variable factor (or labour). 

iv. To lower the the losses one of the ways can be to lower the demand for diesel by taking such measures as encouraging the fuel efficient engine vehicles. Another way to cover the losses can be by increasing the taxes.  

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Total Cost

It refers to the total cost of production that is incurred by a firm in the short run to carry out the production of goods and services. It is the aggregate of expenditure incurred on fixed factors as well as variable factors. Therefore, the total cost can be segmented into following two parts namely- TFC and TVC. That is,

TC = TFC + TVC

Total Variable Costs- These refers to those costs which are incurred by a firm on the variable inputs for production. The variable costs are positive function of output i.e. as output increases, variable costs also increases and vice-versa. That is, as more and more units of labour are employed to produce higher units of output, accordingly the variable costs rises. These costs are also known as Prime Costs or Direct Costs and include expenses such as:

  1. Wages of labour
  2. Fuel expenses
  3. Costs of raw materials

Output

(Units)

TVC

(in Rupees)

0

0

1

10

2

18

3

24

4

36

5

50

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2.

Marginal Revenue (MR)

It is defined as the change in the total revenue due to sale of one more unit output. It is calculated by either of the two following ways.

1. MR

Average revenue is nothing but the price of the product. Average revenue is the same as price of the commodity
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