Which term describes the total cost of production, including opportunity cost?

The term that encompasses the total cost of production, including opportunity costs, is economic cost. Economic cost represents the sum of explicit costs—those directly incurred in production, such as wages and materials—and implicit costs, which reflect the opportunity costs associated with choosing one option over another. These opportunity costs account for the income or benefits that are foregone by not pursuing the next best alternative.

In the context of production decisions, recognizing economic costs is crucial for understanding profitability and efficiency. It helps firms assess not just the actual expenses incurred but also the potential benefits lost from alternative uses of resources. Using economic cost allows for a more comprehensive evaluation of potential projects or investments.

Other terms like fixed cost, marginal cost, and total variable cost do not include the concept of opportunity costs. Fixed costs refer to expenses that do not change with the level of output, marginal cost pertains to the additional cost incurred by producing one more unit, and total variable cost is the sum of costs that vary with output. None of these captures the full spectrum of costs—both explicit and implicit—present in economic decision-making.