fixed cost: Business expenses that are not dependent on the level of goods or services produced by the business.variable cost: A cost that changes with the change in volume of activity of an organization.If a firm manages its short run costs well over time, it will be more likely to succeed in reaching the desired long run costs and goals.
The short run costs increase or decrease based on variable cost as well as the rate of production.Examples of variable costs include employee wages and costs of raw materials. Variable costs change with the output.Efficient long run costs are sustained when the combination of outputs that a firm produces results in the desired quantity of the goods at the lowest possible cost.In the long run, there are no fixed costs.In the short run, there are both fixed and variable costs.
Long run costs have no fixed factors of production, while short run costs have fixed factors and variables that impact production.Įxplain the differences between short and long run costs
