Total cost (TC) is the complete amount of money a business spends to produce a specific amount of goods or services. It is calculated by adding two main types of costs:

• Fixed costs (TFC): These are costs that do not change regardless of how much you produce, such as rent, insurance, and long-term salaries. You must pay these even if production is zero.
• Variable costs (TVC): These are costs that change based on your production level, such as raw materials, energy bills, and hourly wages. These costs increase as you produce more.

The Formula: TC = TFC + TVC

Key Points:

• If output is zero, the total cost equals the fixed costs.
• Total cost is essential for determining success, as Profit = Total Revenue − Total Cost.
• The growth of total cost usually changes as production increases due to efficiency factors in the business.