
Today's Index
Yesterday's Index 105.0
Help us compile the AmosWEB Free Lunch Index. Tell us about your last lunch.
More About the Index



RESERVE REQUIREMENTS: Rules by the Federal Reserve System governing the amount of bank reserves that banks must keep to back up their deposits. Legal reserve requirements came about because banks that practice fractionalreserve banking are sometimes inclined to make too many interestpaying loans and neglect to keep enough reserves on hand to pay their depositors. In principle, the Fed can alter reserve requirements to control the money supply. In practice, however, the Fed prefers to use open market operations or the discount rate.
Visit the GLOSS*arama




TOTAL COST CURVES: The total cost of producing a good can be represented by three related curves, total cost curve, total variable cost curve, and total fixed cost curve. The total cost curve is the vertical summation of the total variable cost curve and the total fixed cost curve. Total Cost Curves 

 The three curves reflecting that total cost that is related to the shortrun production are the total fixed cost curve, the total variable cost curve, and the total cost curve. The exhibit to the right can be used to display the three total cost curves. Total Fixed Cost Curve: The total fixed cost (TFC) curve is a horizontal line. Click the [TFC] button to display the curve for Wacky Willy Stuffed Amigos production. Total fixed cost is equal to $3 and does not change with the quantity of output produced, thus the TFC curve is a flat, horizontal line.
 Total Variable Cost Curve: The total variable cost (TVC) curve is a positivelysloped line that reflects increasing then decreasing marginal returns. Click the [TVC] button to add this curve. The TVC curve emerges from the origin with a relatively steep slope, flattens, then becomes increasingly steeper. In the context of Wacky Willy Stuffed Amigos, the TVC for one Stuffed Amigo is $5, this then rises to $8 for two Stuffed Amigos, $10 for three Stuffed Amigos, etc., finally reaching $43 for ten Stuffed Amigos.
 Total Cost Curve: The total cost (TC) curve can be derived as the vertical summation of the TVC and TFC curves. In other words, the TC curve can be found by shifting the TVC vertically by the amount of TFC. This means that the shape of the TC curve is identical to that of the TVC. The two curves have identical slopes for each quantity of output. For Wacky Willy Stuffed Amigos production, the vertical difference between the TC and TVC curves is exactly $3.00, the value of TFC. Click the [TC] button to identify this curve.
An important conclusion from this derivation of the TC curve is that the vertical distance between TC and TVC curves is the same at ALL output quantities. The reason, of course, is that this vertical distance IS total fixed cost. Because total fixed cost is constant, the vertical distance is constant.From a geometric perspective, a constant gap between two lines means that the lines are parallel. While parallel lines are commonly presented as straight lines, two curved lines like the TC and TVC can also be parallel so long as they do not intersect and their distance remains constant. This further implies that the slopes of the TC and TVC curves are identical at each and every output quantity. In fact, it is acceptable to think of the TC curve as the result of vertically shifting the TVC upward by the amount of total fixed cost. In other words, the TC and TVC curves are essentially the same curve, the TC curve just happens to be a little bit higher in the diagram, higher by the amount of total fixed cost. However, in that the slope of the TC curve is marginal cost, the slope of the TVC curve is also marginal cost. Marginal cost, the increment of total cost resulting from a change in quantity, can be derived using either total cost or total variable cost. This point should be evident by noting that any quantityinduced change in total cost must come from total variable cost. Total fixed cost is fixed, it does not change. As such, marginal cost, the change in total cost, is not affected by total fixed cost.
Recommended Citation:TOTAL COST CURVES, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 20002016. [Accessed: July 25, 2016]. Check Out These Related Terms...        Or For A Little Background...        And For Further Study...              
Search Again?
Back to the WEB*pedia



State of the ECONOMY
U.S. Population
December 26, 2015
322,725,691
Up again...U.S. Census Bureau
More Stats


GRAY SKITTERY [What's This?]
Today, you are likely to spend a great deal of time at the confiscated property police auction trying to buy either a birthday greeting card for your uncle or a Tshirt commemorating the 2000 Presidential election. Be on the lookout for celebrities who speak directly to you through your television. Your Complete Scope
This isn't me! What am I?


There were no banks in colonial America before the U.S. Revolutionary War. Anyone seeking a loan did so from another individual.


"My motto was always to keep swinging. Whether I was in a slump or feeling badly or having trouble off the field, the only thing to do was keep swinging. "  Hank Aaron, baseball player


NTB NonTariff Barrier


Tell us what you think about AmosWEB. Like what you see? Have suggestions for improvements? Let us know. Click the User Feedback link.
User Feedback

