Total Cost (TC)
Definition
Total cost is the sum of all fixed and variable costs incurred in producing a given quantity of output. It includes both explicit (out-of-pocket) costs and implicit (opportunity) costs.
Analogy
Imagine planning a party at home. The total cost would include not only the money spent on decorations, food, and drinks (explicit costs), but also the value you could have gained from doing something else during that time (implicit opportunity cost).
Related terms
Average Total Cost (ATC): ATC is obtained by dividing total cost by the quantity produced, providing an average measure of cost per unit.
Marginal Cost (MC): Marginal cost represents the additional cost incurred when producing one more unit.
Fixed Costs (FC): Fixed costs are expenses that do not change with changes in production levels.
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