Explicit costs are payments made by the firm when it purchases or hires factors of production for the production of goods and services. They are also referred to as historical costs. They may include rents on land, wages and salaries of labour, interest or dividend earnings on capital and producer’s normal profit.
Economies of scale are the “advantages” of large-scale production.The expression “advantages” is used to represent benefits that help the firm to produce at reduced unit cost of production as a result of increasing all inputs in the long run. They are classified into internal economies of scale and external economies of scale.