Total Cost
Definition
Total cost refers to all expenses incurred in producing a certain quantity of goods or services, including both explicit costs (such as wages and materials) and implicit costs (such as opportunity costs).
Analogy
Imagine you're baking cookies. The total cost includes not only the cost of ingredients like flour and sugar but also the value of your time spent baking them. It's important to consider all these costs when determining if it's worth making those delicious cookies.
Related terms
Marginal Cost: Marginal cost is the additional cost incurred from producing one more unit of a good or service.
Production Function: A production function shows how inputs (such as labor and capital) are transformed into outputs (goods or services).
Average Variable Cost: Average variable cost is calculated by dividing total variable cost by the quantity produced, representing the average cost per unit that varies with output.
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