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How to Calculate Total Cost in Economics

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❶Groceries can be a little messier to keep track of, but if you keep your receipts or monitor your checking account transactions online, it shouldn't be hard to get an accurate total. In the world of business, fixed costs are often referred to as overhead costs.

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Total cost for any enterprise has two components -- fixed and variable costs. You as a manager can control variable costs but not fixed costs. Knowing and understanding the cost structure of your business will help you contain costs and increase your profit margin.

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Video: Total Cost in Economics: Definition & Formula Learn about what total cost really means in the economic world. Find out the important components that make up total cost and see how to correctly calculate some common total costs of products and services you may be familiar with.

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Total cost is 50 + 6Q and, as just explained, fixed cost is 50 in this example. Therefore, total variable cost is (50 +6Q) – 50, or 6Q. Now we can calculate total variable cost at a given point by substituting for Q. Now on to average total costs. The total cost formula is used to derive the combined variable and fixed costs of a batch of goods or services. The formula is the average fixed cost per unit plus the average variable cost per unit, multiplied by the number of units.

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Total cost are calculated by adding variable cost and fixed costFC+VC=TC.