Economics defines the “long run” as a time period where a. all but one input are...
Economics defines the “long run” as a time period where
a. all but one input are variable.
b. all inputs are fixed.
c. output is variable.
d. all inputs are variable.
.
Jim decides to start a business manufacturing toothpaste. Which of the following would be an economic cost of the undertaking, but not an accounting cost?
a. $100,000 of Jim's own money that he invests to start up the business.
b. The wages Jim pays to his staff of toothpaste developers.
c. Interest Jim could have made if he put his $100,000 investment into a savings account instead.
d. Costs of toothpaste ingredients Jim needs to purchase each week.
Homework Answers
Ans 1. d) All inputs are variable.
Ans 2. c) Interest Jim could have made if he puts his $100,000 investment into a savings account instead.
Economic cost, unlike the accounting cost, includes the opportunity cost. Opportunity cost is the loss of other alternatives when one alternative is chosen.
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