Short run is a period of time over which certain factors of production cannot be changed, and such factors are called fixed factors. The factors whose quantity can be changed in the short run are variable factors. Long run is a period of time over which all factors of production can be changed, to meet the changes in demand.

Accounting costs or explicit costs are the payments made by the entrepreneur to the suppliers of various productive factors. The accounting costs are only those costs, which are directly paid out or accounted for by the producer i.e. wages to the labourers employed, prices for the raw materials purchased, fuel and power used, rent for the building hired for the production work, the rate of interest on the borrowed capital and the taxes paid.

(i) Private cost is the cost incurred by a firm for production. It includes both implicit costs and explicit costs.
(ii) Social costs are those costs, which are not borne by the producing firm but are incurred by others in society. For example, when an oil refinery discharges its waste in the river causing water pollution, such a pollution results in tremendous health hazards which involve costs to the society as a whole.

(i) In the long run all factors of production become variable.
(ii) The size of the firm can be increased.
(iii) There are no fixed inputs in the long run

LAC = LTC/Q
(iv) It is the locus of points denoting the least cost curve of producing the corresponding output.
(v) The LAC curve is called as 'Plant curve' or Boat shape curve or planning curve or envelope curve.

Marginal revenue is the addition to the total revenue by the sale of an additional unit of a commodity. It is got by dividing change in TR by the change in quantity sold.
\(M R=\frac{\Delta T R}{\Delta Q}\), where MR = Marginal revenue.
\(M R=T R_{n}-T R_{n-1} \quad \Delta T R=\text { change in total revenue. }  \)
\(M R=T R_{n+1}-T R_{n} \quad \Delta Q=\text { change in total quantity. }  \)
\(T R_{n}=\text { total revenue of } n^{\text {th }} \text { item }  \)
\(T R_{n-1}=\text { total revenue of } n-1^{\text {th }}  item\)
\(T R_{n+1}=\text { total revenue of } n+1^{\text {th }}item\)

When AC is falling, MC remains below AC.
When AC becomes constant MC becomes equal to it.
When AC starts increasing MC is above the AC
MC always cuts AC at its minimum point from below.

(i) It refers to the cost of next best alternative use.
(ii) It is the value of the next best alternative foregone
(iii) It is also called alternative cost or transfer cost.
(vi) (eg) A farmer can cultivate paddy or sugarcane in his land.
(v) If he cultivates paddy the opportunity cost of paddy output is the amount of sugarcane output given up.