The rental price per unit of capital is denoted r. Capital is assumed to be the fixed input, meaning that the amount of capital used does not vary with the level of production in the short run. Often, economists use models with two inputs: physical capital, with quantity K and labor, with quantity L. The total cost of producing a specific level of output is the cost of all the factors of production. Either of these derivatives work because the total cost includes variable cost and fixed cost, but fixed cost is a constant with a derivative of 0. The marginal cost can also be calculated by finding the derivative of total cost or variable cost. The additional total cost of one additional unit of production is called marginal cost. Total cost in economics includes the total opportunity cost (benefits received from the next-best alternative) of each factor of production as part of its fixed or variable costs. This is the total economic cost of production and is made up of variable cost, which varies according to the quantity of a good produced and includes inputs such as labor and raw materials, plus fixed cost, which is independent of the quantity of a good produced and includes inputs that cannot be varied in the short term such as buildings and machinery, including possibly sunk costs. In economics, total cost ( TC) is the minimum dollar cost of producing some quantity of output. The total cost curve, if non-linear, can represent increasing and diminishing marginal returns.
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