cost

(noun)

A negative consequence or loss that occurs or is required to occur.

Related Terms

Examples of cost in the following topics:

  • Average and Marginal Cost

    • Marginal cost is the change in total cost when another unit is produced; average cost is the total cost divided by the number of goods produced.
    • Marginal cost is not related to fixed costs.
    • When the average cost declines, the marginal cost is less than the average cost.
    • When the average cost increases, the marginal cost is greater than the average cost.
    • This graph is a cost curve that shows the average total cost, marginal cost, and marginal revenue.

  • Types of Costs

    • In economics, the total cost (TC) is the total economic cost of production.
    • It consists of variable costs and fixed costs.
    • Total cost is the total opportunity cost of each factor of production as part of its fixed or variable costs .
    • Variable costs are also the sum of marginal costs over all of the units produced (referred to as normal costs).
    • Economic cost is the sum of all the variable and fixed costs (also called accounting cost) plus opportunity costs.

  • Economic Costs

    • An example of economic cost would be the cost of attending college.
    • So, the economic cost of college is the accounting cost plus the opportunity cost.
    • So, the economic cost of college is the accounting cost plus the opportunity cost.
    • Total cost (TC): total cost equals total fixed cost plus total variable costs (TC = TFC + TVC) .
    • Variable cost (VC): the cost paid to the variable input.

  • Cost of capital

    • The cost of capital refers to the cost of the money used to pay for the capital.
    • In order to determine a company's cost of capital, the cost of debt and the cost of equity must be calculated.
    • This determines the "market" cost of equity.
    • One way of combining the cost of debt and equity to generate a single cost of capital number is through the weighted-average cost of capital (WACC).
    • The cost of capital is the cost of the money used to finance the plant.

  • The Supply Curve in Perfect Competition

    • The total revenue-total cost perspective and the marginal revenue-marginal cost perspective are used to find profit maximizing quantities.
    • In economics, a cost curve is a graph that shows the costs of production as a function of total quantity produced.
    • In a free market economy, firms use cost curves to find the optimal point of production (minimizing cost).
    • There are two ways in which cost curves can be used to find profit maximizing quantities: the total revenue-total cost perspective and the marginal revenue-marginal cost perspective.
    • The total revenue-total cost perspective recognizes that profit is equal to the total revenue (TR) minus the total cost (TC).

  • Costs and Production in the Short-Run

    • AFC is fixed cost per Q.
    • Sometimes VC is called total variable cost (TVC).
    • It is the variable cost per Q.
    • Total Cost (TC) is the sum of the FC and VC.
    • Average Total Cost (AC or ATC) is the total cost per unit of output.

  • Difference Between Economic and Accounting Profit

    • Explicit costs are costs that involve direct monetary payment.
    • Wages paid to workers, rent paid to a landowner, and material costs paid to a supplier are all examples of explicit costs.
    • In contrast, implicit costs are the opportunity costs of factors of production that a producer already owns.
    • These consist of the explicit costs a firm has to maintain production (for example, wages, rent, and material costs).
    • Economic profit is the difference between total monetary revenue and total costs, but total costs include both explicit and implicit costs.

  • Natural Monopolies

    • The total cost of the natural monopoly is lower than the sum of the total costs of two firms producing the same quantity .
    • Along with this, the average cost of production decreases and then increases.
    • In contrast, a natural monopoly will have a marginal cost that is constant or declining, and an average total cost that drops as the quantity of output increases.
    • Natural monopolies tend to form in industries where there are high fixed costs.
    • The total cost of the natural monopoly's production is lower than the sum of the total costs of two firms producing the same quantity.

  • Cost

    • The concept of "efficiency" is also related to cost.
    • The relevant concept of cost is "opportunity cost."
    • Worker earns a wage based on their opportunity cost.
    • It is also crucial to note that the entrepreneur also has an opportunity cost.
    • The normal profit is determined by the market and is considered a cost.

  • Short Run and Long Run Costs

    • Long run costs have no fixed factors of production, while short run costs have fixed factors and variables that impact production.
    • Fixed costs have no impact of short run costs, only variable costs and revenues affect the short run production.
    • Variable costs change with the output.
    • Examples of variable costs include employee wages and costs of raw materials.
    • The short run costs increase or decrease based on variable cost as well as the rate of production.