When would total cost equal fixed costs?

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pohnpei397's profile pic

pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted on

The only time that total costs can equal fixed costs is when there is no production going on.

The total cost incurred by a firm when it produces goods or services is made up of two parts.  There are fixed costs (building, machinery, etc which don't change as output goes up or down) and there are variable costs (costs that change with output, like materials and labor).

Given that, total costs can only equal fixed costs when there are no variable costs.  If there are no variable costs, nothing is being produced.

krishna-agrawala's profile pic

krishna-agrawala | College Teacher | (Level 3) Valedictorian

Posted on

Total costs would equal fixed costs when turnover is zero.

In economic and business analysis total costs of production or of goods sold are often classified in two components as fixed costs and variable cost.

Fixed costs are defined as the costs that remain constant irrespective of the total production or sales turnover. Variable costs on the other hand vary directly with the turnover. The total cost at a given level of turnover is the sum of fixed cost plus variable cost.

When the turnover is zero, the variable cost is also zero, and therefore, the the total cost is equal to the fixed cost.