Difference between traditional theory of cost and modern theory of cos

1.	Difference between traditional theory of cost and modern theory of cost.
Answer» The traditional and modern theory of cost\tThe traditional theory of cost consists of short and long-run costs. The short-run is fixed for some period and consists of usually entrepreneurship and equipment. The long-run is the cost over which the factors becomes variable. \tThe short-run costs of traditional method include TC = TFC + TVC. They include the salaries of administrative staff, wear and tear of machinery, and expense of land and depreciation. The variable costs include the raw materials and costs of indirect labor.\tThe long-run costs of the traditional method said to be in the form of a planning curve, which guides in decision making and expansion of future output. It is derived from the short-run average costs.\tThe modern cost theory regards the shape of curves and appears to be in the form of U shaped. The short term curves are AFC, SMC, SAC derived form the tola fixed, and variable costs. \tLong term cost curves are L shaped and curves fall after a point and may slope down gently.

Difference between traditional theory of cost and modern theory of cost.