Skip to content

Fundamentals of Business Economics and Management · Cost of Production

Short-Run Cost Curves: Fixed, Variable and Total Cost

Updated 10 October 2026 · Fact-checked

In the short run, total cost (TC) is total fixed cost (TFC) plus total variable cost (TVC). TFC stays constant at every output, even zero. TVC starts from zero and rises with output. TC starts at the level of TFC and rises in the same way as TVC. Solve questions with TC = TFC + TVC.

Understand Short-Run Cost Curves: Fixed, Variable and Total Cost

The short run is a period in which at least one input, such as plant, machinery or building, cannot be changed. Because of this, a firm can raise output only by using more of the variable inputs, such as labour and raw material.

Total fixed cost (TFC) is the cost of the fixed inputs. Rent, insurance and depreciation on machinery are examples. TFC does not change with output. It is the same at 0 units and at 1,000 units. So the TFC curve is a horizontal straight line parallel to the output axis.

Total variable cost (TVC) is the cost of the variable inputs, such as raw material, wages of casual workers and power used in production. At zero output TVC is zero, so the curve starts from the origin. As output rises, TVC rises. At first it rises at a decreasing rate, because extra workers use the fixed plant better. Later it rises at an increasing rate, because of diminishing returns. This gives the TVC curve an inverse-S shape.

Total cost (TC) is TFC plus TVC. At zero output TC equals TFC, so the TC curve starts on the cost axis at the TFC level, not at the origin. The vertical gap between the TC and TVC curves is always equal to TFC, so the two curves are parallel in their vertical distance and have the same shape.

The shapes come from the law of variable proportions. Initially returns to the variable input increase, so each extra unit of output costs less to add. After a point returns diminish, so each extra unit costs more to add.

Key formulas to remember

Total cost
TC = TFC + TVC
The basic relation. Use it to find any one of the three when the other two are given.
Total variable cost
TVC = TC − TFC
Also equals the sum of variable costs of all units produced.
Total fixed cost
TFC = TC − TVC
At zero output, TFC = TC because TVC = 0.
Fixed cost at any output
TFC is constant for all outputs
The TFC curve is a horizontal line. Do not multiply it by output.
Gap between TC and TVC
TC − TVC = TFC at every output
The vertical distance between the two curves is constant.

How to solve Short-Run Cost Curves: Fixed, Variable and Total Cost questions

Use this method for any question on TFC, TVC and TC, whether it gives a table, a curve or a statement.

  1. 1Identify which costs are fixed (do not change with output) and which are variable (change with output).
  2. 2Read TFC from the cost at zero output, or from the item that stays the same in every row.
  3. 3Check that TVC is zero at zero output. If TC is given at zero output, that value is TFC.
  4. 4Apply TC = TFC + TVC, or rearrange it to find the missing cost.
  5. 5Do this row by row if a table is given, and check that TFC is the same in every row.
  6. 6For shape questions, recall: TFC horizontal, TVC from origin and inverse-S, TC starts at TFC and parallel to TVC.
  7. 7Match your result to the options and check that the answer is consistent with the curve shapes.

Quickest way: Zero-output shortcut

When to use it: Use when a table gives TC at different outputs, or when a question asks for TFC or TVC from a few numbers.

  1. Look for the cost at zero output. That is TFC.
  2. Subtract TFC from any TC to get TVC at that output.
  3. For curve-shape options, eliminate any option where TFC slopes or TVC starts above zero.
  4. Eliminate any option where TC starts at the origin.

Common mistakes in Short-Run Cost Curves: Fixed, Variable and Total Cost

  • Thinking TFC rises with output.

    Students confuse total fixed cost with fixed cost per unit, which falls as output rises.

    Fix: Total fixed cost never changes in the short run. Only average fixed cost falls.

  • Starting the TVC curve on the cost axis above zero.

    Students copy the TC curve's starting point.

    Fix: TVC is zero when nothing is produced, so it starts at the origin. Only TC starts at TFC.

  • Drawing TC from the origin.

    Students forget that fixed costs must be paid even at zero output.

    Fix: At zero output TC = TFC, so TC starts at the TFC level on the vertical axis.

  • Treating TC and TVC as having different shapes.

    Students see that TC lies above TVC and assume they differ in form.

    Fix: TC is TVC shifted up by a constant TFC. The vertical gap is the same everywhere.

  • Classing wages as always variable or always fixed.

    Students memorise lists instead of testing the cost against output.

    Fix: Ask whether the cost changes when output changes. Salary of a permanent manager is fixed. Wages paid per unit produced are variable.

Worked examples

Example 1

A firm in the short run has a monthly factory rent and machinery insurance of ₹40,000. At 100 units its total variable cost is ₹60,000. What is the total cost at 100 units, and what is the total cost at zero output?

Show the solution
  1. Rent and insurance do not change with output, so TFC = ₹40,000.
  2. At 100 units, TC = TFC + TVC = 40,000 + 60,000 = ₹1,00,000.
  3. At zero output, TVC = 0, so TC = TFC = ₹40,000.

Answer: TC at 100 units is ₹1,00,000 and TC at zero output is ₹40,000.

Example 2

A table shows total cost at different outputs: 0 units: ₹5,000; 10 units: ₹8,000; 20 units: ₹10,000; 30 units: ₹14,000. Find TFC and the TVC at 30 units. Also state whether TFC at 20 units is different from TFC at 10 units.

Show the solution
  1. TC at zero output is ₹5,000, so TFC = ₹5,000.
  2. TFC is constant in the short run, so it is ₹5,000 at every output.
  3. TVC at 30 units = TC − TFC = 14,000 − 5,000 = ₹9,000.
  4. TFC at 20 units is ₹5,000, the same as at 10 units.

Answer: TFC = ₹5,000 at all outputs. TVC at 30 units = ₹9,000. TFC at 20 units is not different from TFC at 10 units.

Exam tips

  • Questions often ask which curve starts at the origin. The answer is TVC, not TC or TFC.
  • When a table is given, the TC at zero output is your TFC. Find it first.
  • Watch for options that say TFC rises with output. These are wrong, but may be right for average fixed cost only if the word 'average' is used.
  • Questions on shape ask for reasons. Link the inverse-S of TVC to increasing and then diminishing returns.
  • Check the period. Fixed costs exist only in the short run. In the long run all costs are variable.

Practice questions from Cost of Production

Short-Run Cost Curves: Fixed, Variable and Total Cost in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Short-Run Cost Curves: Fixed, Variable and Total Cost: frequently asked questions

What is the difference between fixed cost and variable cost?

Fixed cost does not change with the level of output in the short run, for example rent. Variable cost changes as output changes, for example raw material. Fixed cost is incurred even at zero output, while variable cost is zero then.

How do I calculate total cost from fixed and variable cost?

Add them: TC = TFC + TVC. For example, if TFC is ₹20,000 and TVC is ₹30,000, total cost is ₹50,000. If you have TC and one of the others, subtract to find the missing one.

Why is the TVC curve inverse-S shaped?

It follows the law of variable proportions. At first, extra units of the variable input raise output by more, so cost rises slowly. After a point returns diminish, and cost rises faster.

Why does the TC curve not start from the origin?

Because fixed costs must be paid even when the firm produces nothing. At zero output TC equals TFC, so the curve starts at that height on the cost axis.