Any costs incurred by a firm may be classified into two groups: fixed costs and variable costs. Fixed costs, which occur only in the short run, are incurred by the business at any level of output, including zero output. These may include equipment maintenance, rent, wages of employees whose numbers cannot be increased or decreased in the short run, and general upkeep. Variable costs change with the level of output, increasing as more product is generated. Materials consumed during production often have the largest impact on this category, which also includes the wages of employees who can be hired and laid off in the short run span of time under consideration. Fixed cost and variable cost, combined, equal total cost.
any costs incurred by a firm may be classified into two groups fixed costs and variable costs fixed costs which occur only in the short run are incurred by the business at any level of output including zero output these may include equipment maintenance rent wages of employees whose numbers cannot be increased or decreased in the short run and general upkeep variable costs change with the level of output increasing as more product is generated materials consumed during production often have the largest impact on this category which also includes the wages of employees who can be hired and laid off in the short run span of time under consideration fixed cost and variable cost combined equal total cost