Explain the difference between costs in the short run and long run
Short run is the period of time during which production can be increased only by increasing variable factors. Fixed factor like plant and machinery remains constant. The producer can control only the variable costs not the fixed cost. Accordingly, the producer must cover at least variable costs of production during the short period.
Long period is the period of time during which production can be increased by way of additional application of all the factors of production. The producer must cover all costs of production. In fact all costs are of the nature of variable costs in the long run because no factor is a fixed factor in the long run. All costs are under the control of the producer, and therefore must be covered.
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