Question

In major cities, as the development goes on, the parking generation rate increases rapidly

which leads to major parking problems.

Same is the case with the college over the years as the college is growing in size student’s

strength has also increased manifolds. One of the issues often discussed among the student is

the Parking problem

Assume that the college calls on private companies to submit a proposal to manage the

parking. You are taken as an adviser to the company to help them draft a proposal. Following

are the questions to be answered to finalise the proposal.

Question: In terms of costing what will be the factor of production and factor payment?

Question: Based on the factor of production what will be the Total fixed cost, Total variable cost and total cost? Explain with table

Answer 1

Output (Units)	Total Fixed Cost (TFC)	Total Variable cost ( TVC)	Total Cost ( TC) = TFC + TVC
0	12	0	12 + 0 = 12
1	12	6	12 + 6 = 18
2	12	10	12 + 10 = 22
3	12	15	12 + 15 = 27
4	12	24	12 + 24 = 36
5	12	35	12 + 35 = 47

In the table, TC = TFC = 12 at zero level of output because TVC is zero. At 1 unit of output, TFC remains same at 12, but TVC increase to 6. As a result, TC becomes 12 + 6 = 18. Similarly, other values of TC have been calculated.

(A ). Factor payments are the income people receive for supplying the factors of production : land, labor, capital or entrepreneurship.

Payments made of scarce resources, or the factors of production in return for productive services. They are also categorized according to the services of the productive resources being rewarded. As wages are being paid for services of labor, interest is paid for the services of capital, rent is paid for the services provided by the land or other immovable assets and profit is for the factor of payment to entrepreneurship.

An economy is dependent on the production of goods and services, hence factors of production are required for the production of goods and services. They are broadly divided in the three factors of production: land, labor, and capital. Land is the primary factor of production. Labor is the specific factor of production and payment is made in the form of wage. Capital is regarded as secondary factor of production as it can be manipulated by economic activity. Payment received would be in the form of interest. Later Entrepreneurship was added as the fourth factor of production. It earns profit to the entrepreneur.