Question

in the long-run which of the following is true? a. total cost equals fixed cost plus variable cost. b. the size of a firm's physical plant can be changed but the firm cannot adopt new technology. c. there are no fixed costs. d. the firm can vary its explicit costs but not its implicit costs.

Answer 1

Since there are no fixed costs in the long run, choice (c) is the correct one.

What is implicit cost?

You make the decision to forgo receiving a salary during the first two years in order to assist cover starting costs. Any expense that has already happened but isn't always shown or reported as a separate charge is considered an implicit cost. It stands for an opportunity cost that develops when a business commits internal resources to a project without receiving any direct payment in exchange. In the field of economics, an implicit cost, also known as an imputed cost, implied cost, or notional cost, is the opportunity cost corresponding to what a company must forgo in order to employ a factor of production that it already owns and is therefore not subject to rental fees. In contrast, an explicit expense is one that is paid for up front.

Which is not an implicit cost?

Employee salaries serve as a direct variable cost that is dependent on the level of production; as such, they are an accounting expense rather than an implicit one.

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