Concepts Of Cost And Revenue — Flashcards

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Cost of production means the cost of purchasing inputs paid as wages, prices of raw materials, rent, interest, and similar expenses. In economics, it is broader than money paid to outsiders because it…

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Explicit cost is the actual money expenditure incurred on hired or purchased inputs and is recorded in the business ledger. Implicit cost is the imputed value of self-owned or self-supplied resources …

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Economic cost is the sum of explicit cost and implicit cost, including normal profit. It is the true cost concept used in economics and is different from accounting cost, which includes only explicit …

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Opportunity cost, also called alternative cost, is the value of the next best alternative forgone when resources are used to produce a good. It means the single most valuable alternative sacrificed, n…

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Real cost means the sacrifice, toil, and trouble faced by a factor or owner in production. It is different from money cost because it refers to effort, pain, waiting, and abstinence. Real cost is link…

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Private cost is the cost incurred by an individual firm in producing a commodity. It includes both explicit cost and implicit cost, so it is the same as economic cost. It matters because it shows the …

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Social cost is the sum of private cost and external cost. It is a wider concept than private cost because it includes the cost borne by society, not just the firm. For example, pollution caused by pro…

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The cost function shows the total cost at each level of output. It is written as C = f(Q), where C is total cost and Q is output. A firm uses it to find the least-cost combination of inputs for a give…