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The short-run total cost of a firm is composed of which two elements?
ATotal fixed cost and total variable cost
BAverage cost and marginal cost
CExplicit cost and opportunity cost
DHistorical cost and replacement cost
Answer & Solution
Correct answer: A. Total fixed cost and total variable cost
1. In the short run, total cost is defined as TC = TFC + TVC.
2. Total fixed cost stays constant with output; total variable cost rises with output.
3. Adding these two gives short-run total cost, so the components are TFC and TVC.
4. Average and marginal cost (B) are derived per-unit measures, not components of TC; (C) and (D) are unrelated cost classifications. Hence TFC and TVC.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 3 Unit II "Theory of Cost", p.5_
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