Economics Short Run Vs Long Run Costs Questions
In the short run, marginal costs refer to the additional cost incurred by a firm to produce one more unit of output. It is calculated by dividing the change in total cost by the change in quantity produced. Marginal costs are influenced by variable factors such as labor and raw materials, which can be adjusted in the short run. As production increases, marginal costs may initially decrease due to economies of scale, but eventually start to rise due to diminishing returns.