Answer to Question #243832 in Macroeconomics for Soliy

Question

Mention and explain the cost components certainly do not exist in the long run?

Answer 1

The cost components include fixed costs and variable costs. 

Variable costs are the costs which vary with the quantity produced. These include the costs associated with labor ie wages etc. 

Fixed costs are the costs which do not vary with the quantity produced. These include the costs like the rent, electricity bill etc. 

Fixed and variable costs are the costs which occur in short run. In long run, the fixed costs disappear. This is because the time period is large enough for the factors of production to become variable. The land could be changed, so can the capital and labor. Hence the fixed cost is the cost component which does not exist in long run. Variable costs exist in long run.