Cost of Production: Fixed and Variable Costs

Cost of production is the total expenditure incurred in producing a commodity, made up of definite (explicit) and implicit costs. In the short run, total cost splits into Total Fixed Cost (TFC), which stays constant rega…

• Cost is the total expenditure incurred in producing a commodity — the sum of all expenses.
• Definite cost = actual money paid to outsiders for inputs (salary, rent).
• Implicit cost = estimated value of inputs supplied by owners, including normal profit.

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