Economics Short Run Vs Long Run Costs Questions
Explicit costs in the short run refer to the actual out-of-pocket expenses that a firm incurs in order to produce goods or services. These costs are easily quantifiable and include expenses such as wages, rent, raw materials, utilities, and other direct costs. In the short run, firms have limited flexibility to adjust their production levels or inputs, so explicit costs play a crucial role in determining the profitability and viability of a business.