Total cost is obtain by?

Step 1: Analyze the question The question asks how Total Cost (TC) is obtained in economics.

Step 2: Explain the concept In the short run, a firm has two types of costs:

• Fixed costs (TFC): costs that do not change with output, such as rent, insurance and salaries of permanent staff. They must be paid even when output is zero.
• Variable costs (TVC): costs that change with output, such as raw materials, wages of casual workers and fuel.

Step 3: Show the solution

Total Cost = Total Fixed Cost + Total Variable Cost

TC = TFC + TVC

Now check each option:

• A. Adding up the marginal cost at each level: This is partly true in a special sense. The sum of marginal costs gives the total variable cost, not total cost, because it leaves out fixed cost. So it is incomplete.
• B. Dividing the total cost of output at each level: Dividing total cost by output gives average cost, not total cost.
• C. Adding up the average variable cost at each level: This has no meaningful link to total cost.
• D. Adding up total variable cost and total fixed cost: This is the standard definition of total cost.

Step 4: Answer The correct option is D.

Tip: Remember the formula TC = TFC + TVC. The related ones are:

• AC = TC ÷ Q
• MC = change in TC ÷ change in Q
• AVC = TVC ÷ Q

If an option mentions "dividing", it is about an average, not a total.