ECO 3100 - Chapter 7: Costs Questions with Complete Solutions

Opportunity Cost Correct Answer-The cost of a good measured by the alternative uses that are foregone by producing the good. Accounting Cost Correct Answer-The actual cost paid for inputs Economic Cost Correct Answer-The amount required to keep an input in its present use or the amount that input would be worth in its next best alternative use. Labor Costs Correct Answer-Costs involving the compensation of employees for their labor - Wage payments are an explicit costs -Wage rate is the amount a worker would earn in her next best alternative employment. Capital Costs Correct Answer-money spent on fixed assets - An accountant uses the historical cost of capital and some depreciation rule. -An economist treats the cost of capital as a sunk cost, which is an expenditure that once made can't be recovered. -The implicit cost of capi