Economic cost is the combination of losses of any goods that have a value attached to them by any one individual. Economic cost is used mainly by

economist An economist is a professional and practitioner in the social sciences, social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy. Within this ...

s as means to compare the prudence of one course of action with that of another. The comparison includes the gains and losses precluded by taking a course of action as well as those of the course taken itself. Economic cost differs from accounting cost because it includes

opportunity cost In microeconomic theory, the opportunity cost of a particular activity is the value or benefit given up by engaging in that activity, relative to engaging in an alternative activity. More effective it means if you chose one activity (for example ...

. (Some sources refer to accounting cost as ''explicit cost'' and opportunity cost as ''implicit cost''.)

Aspects of economic costs

Per Unit Economic Costs for a Firm - Short Run with a Fixed Cost

Variable cost Variable costs are costs that change as the quantity of the good or service that a business produces changes.Garrison, Noreen, Brewer. Ch 2 - Managerial Accounting and Costs Concepts, pp 48 Variable costs are the sum of marginal costs over all un ...

: Variable costs are the costs paid to the variable input. Inputs include labor, capital, materials, power and land and buildings. Variable inputs are inputs whose use vary with output. Conventionally the variable input is assumed to be labor. ** Total variable cost (TVC) is the same as variable costs. *

Fixed cost In accounting and economics, 'fixed costs', also known as indirect costs or overhead costs, are business expenses that are not dependent on the level of goods or services produced by the business. They tend to be recurring, such as interest or r ...

(TFC) are the costs of the fixed assets those that do not vary with production. **Total fixed cost (TFC) * Average cost (AC) are total costs divided by output. AC = TFC/q + TVC/q **

Average fixed cost In economics, average fixed cost (AFC) is the fixed costs of production (FC) divided by the quantity (Q) of output produced. Fixed costs are those costs that must be incurred in fixed quantity regardless of the level of output produced. :AFC=\fra ...

(AFC) is equal to total fixed cost divided by output i.e. AFC = TFC/q. The average fixed cost function continuously declines as production increases. ** Average variable cost (A.V.C) = variable costs divided by output. AVC =TVC/q. The average variable cost curve is typically U-shaped. It lies below the average cost curve and generally has the same shape - the vertical distance between the average cost curve and average variable cost curve equals average fixed costs. The curve normally starts to the right of the y axis because with zero production *

Marginal cost In economics, the marginal cost is the change in the total cost that arises when the quantity produced is incremented, the cost of producing additional quantity. In some contexts, it refers to an increment of one unit of output, and in others it ...

(MC): Marginal cost is obtained from the additional cost that results from increasing output by one unit. It is the additional cost per additional unit of output. * Cost curves: It is the graphical presentation of the costs of production as a function of total quantity produced

References

{{Economics Costs Corporate development