Topic

Businesses and the Costs of Production

Instructions

Consider the following as you read:

What is the difference between accounting costs and economic costs?
Why do economic costs include both explicit (revealed and expressed) costs and implicit (present but not obvious) costs?
What are the differences between fixed and variable costs and among total, average, and marginal costs?

Answer preview

During normal business operations, business usually encounters different accounting costs. The difference between accounting costs and economic costs is that accounting costs normally come from the total explicit costs of the business organization during the fiscal year. Notably, explicit costs are interpreted monetary values and are utilized to compute the net income when the fiscal year ends. On the other hand, economic costs examine both the implicit and explicit costs to the business organization that happen during the fiscal year. It is apparent that implicit costs are related with resources that are offered to the business organization without price tag.

Word count: 242