Economics Short Run Vs Long Run Costs Questions
Implicit costs in the long run refer to the opportunity costs of using resources in a particular way. These costs are not explicitly incurred or recorded in the accounting books, but they represent the value of the next best alternative foregone. Implicit costs include the foregone income or profits that could have been earned by using resources in an alternative way. In the long run, firms consider both explicit costs (such as wages, rent, and materials) and implicit costs (such as the opportunity cost of using owner's time or capital) when making decisions about resource allocation and production.