What is considered part of total costs in production?

Total costs in production encompass all expenses incurred in the production process, which includes both fixed and variable costs, as well as the opportunity cost of capital, commonly represented by normal profit. Normal profit is the minimum profit required to keep a firm in operation; it is considered a cost of doing business. Thus, when calculating total costs, it's crucial to include this normal profit alongside other costs to fully capture the economic expenses associated with production.

Considering this context, fixed costs represent expenses that do not change with the level of production, while variable costs fluctuate with output levels. While these costs are essential components of total costs, they do not encompass the entirety of what is considered in total costs, as they are just parts of the broader picture that includes normal profit. The inclusion of normal profit reflects the opportunity cost of the resources used in production, thereby providing a more comprehensive view of total costs in the production process.