High Fixed Costs in The Short Run
A company's fixed cost does not vary with the volume of production. It remains the same even if no goods or services are produced, and cannot be avoided.
Gilead Sciences, Inc is an American biopharmaceutical company headquartered in Foster City, California that researches, develops, and commercializes drugs. Remdesivir is a broad-spectrum antiviral medication developed by Gilead, as a solution to fight the coronavirus(COV-19), and has been issued an Emergency Use Authorization (EUA) in the U.S. for those hospitalized with severe disease. But before it actually in doctors' prescriptions, the company has to pay for the huge fixed cost in the short run such as research, development, tests, paychecks for high-education scientists, professional equipment for the labs, which are all very costly. If the cure has been found very successfully, the profit is substantial and the fixed cost in the short run becomes far less important. But before that, lots of money gonna be burned on the fixed cost. The Food and Drug Administration is the oldest comprehensive consumer protection agency in the U. S. federal government. Normally, a drug has to be verified by the FDA for its legalization. Unfortunately, It may take a very long period of time. Although fails are the only way to succeed, It is costly. Suppose you hire a team consisted of scientists, working for the solution to COV-19. Those scientists work 24/7 to find the solution and the facilities inside the lab are operating and analyze the data with no rest while your lab has not actually produced any one product. As the boss, you still have to pay the bills for continuing their research.
High Marginal Costs in The Short Run
The marginal cost of production is the change in total production cost that comes from making or producing one "additional" unit. As the word "additional", It is very different from the average cost. Automobiles Ettore Bugatti was a French car manufacturer of high-performance automobiles, founded in 1909 in the then-German city of Molsheim, Alsace by the Italian-born industrial designer Ettore Bugatti. Consider each additional luxury car, the company has to pay the very high sunk cost in the short run. To produce each additional well-design sports car, the fixed cost, and the variable cost are from the consumers' customization. The consumers want a special and limited car. Every additional customization means an additional new cost of design, production, or even new patented technology. Just like the official state "Extremely powerful and very exclusive. Bugatti hyper sports cars have always been at the very pinnacle of automobile construction. They are unique pieces of the highest quality and craftsmanship, developed and manufactured with enormous attention to detail".
Reference
OpenStax College. (2016). Principles of economics. http://cnx.org/contents/69619d2b-68f0-44b0-b074-a9b2bf90b2c6@11.330
Gilead Sciences. (2020, May 5). Retrieved from https://en.wikipedia.org/wiki/Gilead_Sciences
Bugatti. (2020, February 16). Retrieved from https://en.wikipedia.org/wiki/Bugatti
Bugatti. (2020, May 7). Official BUGATTI Website. Retrieved from https://www.bugatti.com/
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