Dear aspirant,

Costs can be classified in two categories :

1. Short term cost : For short period of time total cost of production is divided into fixed cost and variable cost. Fixed cost is that cost which does not changes with change with output. And variable cost is that cost which changes with the change in output. For example to produce grains on the land farmer requires capital and labour. So for short term farmer would not be able to increase his capital(I.e. land) to increase his produce but for short run he can surely increase his labour which is variable cost to increase his produce.

2. long term cost : in the long run there is no fixed cost there is only variable cost. In above example only there is possibility that farmer can purchase new land to increase his produce and double his income. So in long term capital and labour of the farmer becomes variable cost as it changes with the change in the output.

If talk about short run equilibrium then it would be that point at which maximum output is generated with minimum utilisation of input. I.e. optimum utilisation of resources is happening.

At short run equilibrium total cost would be variable cost + fixed cost which generates maximum revenue. And that total cost, below and above equilibrium total cost will not generate maximum revenue as their would be under and over utilisation of resources in either of the cases.