Total cost

The rental price per unit of capital is denoted r. Thus, the total fixed cost equals Kr.

The long run total cost for a given output will generally be lower than the short run total cost, because the amount of capital can be chosen to be optimal for the amount of output.

Other economic models use the total variable cost curve (and therefore total cost curve) to illustrate the concepts of increasing, and later diminishing, marginal return.

"This distinction is crucial in forecasting the earnings generated by various changes in unit sales and thus the financial impact of proposed marketing campaigns.

"[citation needed] In a survey of nearly 200 senior marketing managers, 60% responded that they found the "variable and fixed costs" metric very useful.

One can decompose total costs as the sum of fixed costs and variable costs . Here output is measured along the horizontal axis. In the Cost-Volume-Profit Analysis model, total costs are linear in volume.
The total cost curve, if non-linear, can represent increasing and diminishing marginal returns .