Question 2 a) A producer borrows money and starts a business. He himself looks after the business. Identify implicit and explicit costs from this information. Explain. b) List and explain which of the following is a fixed cost or a variable cost for Caribbean Airlines. i. The rent on its Piarco headquarters. The lease payments on its current inventory of jets. iv. The cost of fuel used in its planes. ii. iii. The cost of peanuts it serves to passengers. The salary paid to the Chief Executive Officer. v. c) How is the difference between average total cost and average variable cost impacted by an increase in output?

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Short-Run Costs and Long-Run Costs

Cost of short-run and the long-run is an economic term that describes the cost involved in the production of goods in a firm in the short as well as long period.