Which of the following equations correctly represents the total annual cost (TC) for a firm producing quantity Q with fixed cost FC and variable cost VC(Q)?

• A. TC = VC(Q) / FC
• B. TC = FC imes VC(Q)
• C. TC = FC + VC(Q)
• D. TC = FC - VC(Q)

Answer: (C)

Verified step by step guidance

1. Understand the components of total cost (TC): it consists of fixed costs (FC), which do not change with output, and variable costs (VC(Q)), which depend on the quantity produced Q.
2. Recall the definition of total cost: it is the sum of fixed costs and variable costs, so the general formula is \(TC = FC + VC(Q)\).
3. Evaluate the given options by checking if they align with the definition: dividing or multiplying fixed and variable costs does not represent total cost correctly.
4. Recognize that subtracting variable cost from fixed cost would not make economic sense, as total cost cannot be less than fixed cost alone when producing positive output.
5. Conclude that the correct equation representing total annual cost is \(TC = FC + VC(Q)\), which adds fixed and variable costs to find total cost.