Total cost of a firm is:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → the sum of total fixed cost and total variable cost
Total cost is all that the firm spends on fixed and variable inputs: TC = TFC + TVC.
Option (1) total cost per unit of output — Incorrect. Total cost per unit of output is average cost (SAC).
Option (2) the change in total cost per unit of change in output — Incorrect. The change in total cost per unit of change in output is marginal cost.
Option (3) the sum of total fixed cost and total variable cost — Correct. Fixed cost and variable cost are added.
Option (4) total variable cost minus total fixed cost — Incorrect. The two costs are added, not subtracted.
NCERT (2026-27): “3.7.1 Short Run Costs We have previously discussed the short run and the long run. In the short run, some of the factors of production cannot be varied, and therefore, remain fixed. The cost that a firm incurs to employ these fixed inputs is called the total fixed cost (TFC). Whatever amount of output the firm produces, this cost remains fixed for the firm. To produce any required level of output, the firm, in the short run, can adjust only variable inputs. Accordingly, the cost that a firm incurs to employ these variable inputs is called the total variable cost (TVC). Adding the fixed and the variable costs, we get the total cost (TC) of a firm TC = TVC + TFC” |