ECON 230D1 Chapter Notes - Chapter 7: Isocost, Sunk Costs, Variable Cost
25 Dec 2016
School
Department
Course
Professor
Document Summary
Economically efficient: minimizing the cost of producing a specified amount of output. Costs must first be measured before showing how cost varies with output. Explicit costs: the firms direct, out of pocket payments for inputs to its production process within a given time period. Implicit costs: costs that reflect only a forgone opportunity rather than an explicit, current expenditure. Opportunity costs: economic cost (opportunity cost): the value of the best alternative use of a resource. Costs of durable inputs: durable good: a product that is usable for years. Two problems when measuring cost of capital: How to allocate the initial purchase cost over time. What to do if the value of the capital changes over time. Sunk costs: sunk cost: a past expenditure that cannot be recovered. If an expenditure is sunk, it is not an opportunity cost. A firm"s cost rises as it increases it output.
