ECO105Y1 Chapter Notes - Chapter 6: Longrun, Web Hosting Service, Opportunity Cost
Document Summary
Chapter 7 opportunity costs, economic profits and losses, and the miracle of markets. Business success has a clear and simple measure the bottom line, or the profits that remain once you subtract al costs from your revenues. Obvious costs are the ones that are plain to see, for instance rent, web hosting, phone lines also called explicit costs. Accounting profits revenues minus obvious costs (including depreciation) Above three are costs which are counted by accountants. Opportunity cost i. e. what the business owner could earn elsewhere with their time and money is called the implicit cost, and is not counted by accountants. Interest you need to pay the bank on the money you borrow to start your own business is an obvious cost. Calculating the precise opportunity cost of investing your money is risky because investing is risky, while bank returns are guaranteed.
