ECON 201 Chapter Notes - Chapter 13: Average Cost, Marginal Cost, Variable Cost
12 Feb 2017
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When economists speak of a firm"s cost of production, they include all the opportunity costs of making its output of goods and services. Explicit costs: input costs that require an outlay of money by the firm. The distinction between explicit and implicit costs highlights an important difference implicit costs: input costs that do not require an outlay of money by the firm between how economists and accountants analyze a business. Economists are interested in studying how firms make production and pricing decisions. Economists look at both explicit and implicit, while accountants look at explicit. The cost of capital as an opportunity cost. An important implicit cost of almost every business is the opportunity cost of the financial capital that has been invested in the business. Economists and accountants treat costs differently, and this is especially true in their treatment of the cost of capital. Economic profit: total revenue minus total cost, including both explicit and implicit costs.
