The paper "Explicit and Implicit Costs, Variable Costs " is an outstanding example of a micro and macroeconomic assignment. Explicit and implicit costs differ in that explicit costs are costs that are actually incurred by the organization during production and they can directly be traced to production while implicit costs are the costs that cannot be directly traced to production but are implied in nature and do not involve a cash payment. Examples of explicit costs are salaries, rent, wages and advertisement while examples of implicit costs are interesting on the owner’ s capital, rent of the owner’ s building and salary to the owner where cash is not incurred in reality. The difference between short-run and long-run is that the short-run is a period of time when the quantity of at least one input is fixed and the quantity of the other inputs is variable while the long-run is a period of time when all the quantities of all inputs are varied.
The long-run and short-run have no fixed time and hence different companies have a varying long run and short-run periods. For example, company A might take five years to have all its costs become variable and hence operate in the long run while another can take twenty years to achieve the same. Total product Total fixed cost Total variable cost Total cost Average fixed cost Average variable cost Average total cost Marginal cost 0 $60 $0 $60 $60 $0 $60 $60 1 $60 $50 $110 $60 $50 $110 $50 2 $60 $88 $148 $30 $44 $74 $19 3 $60 $120 $180 $20 $40 $60 $16 4 $60 $150 $210 $15 $37.5 $52.5 $7.5 5 $60 $182 $242 $12 $36.4 $48.4 $6.4 A minimum efficient scale refers to the smallest production amount that a firm can achieve while taking advantage of economies of scale as far as supplies and costs are concerned.
If a firm does not reach a minimum efficient scale in the long run, it will not operate efficiently and hence it will be operating at losses.
Consequently, it will be forced to close down. Variable costs which include the costs of nuclear reactors appear to be the problem when it comes to nuclear energy. It makes the nuclear plants uneconomical since the costs of nuclear reactors are too high making it uneconomical when compared to renewable energy sources. Stable demand for electricity affects the viability of new nuclear power plants since there will be no market for the new power produced and hence they will be deemed unnecessary.
Gillman, M2010, Advanced modern micro economics, London, Rutledge.