Economic Costs and Economics Analysis

Economic Costs and Economics Analysis

Economic Costs

The economic costs are highly significant for organizational operations since the decisions on economic costs depend a huge deal on the cost of the alternative that is chosen as well as the extent of the benefit the best alternative can provide. The striking feature in the case of economic costs is the inclusion of opportunity cost which signifies the extent of benefit the opportunity can provide keeping in consideration the cost involved of the opportunity to be undertaken.

The economic costs comprise of the total cost, fixed cost, variable cost, average variable cost, average fixed cost, average total cost, as well as the marginal cost. Other costs like total fixed cost, total variable cost and other type of costs are incorporated in the calculation of economic costs. When organizations study the essence of economic costs, they are prone to studying the impact of these costs as a way to align them with the revenue (Pimentel, Marklein, Toth, Karpoff, Paul, McCormack, & Krueger, 2009).

For instance we can take the case of economic cost pertaining to attendance in college. The opportunity cost of attending college includes the wages or salary that would have otherwise been earned in the period of the degree. The total period spent by students in schools usually consisting of two to four years, the opportunity cost is known to include the overall amount of money that the individual could have made at his best possible job.

The opportunity cost is compared according to the amount of money the individual would have made at his job in comparison with the amount of money that he has made at college. The economic cost of attending college involves the accounting cost as well as the opportunity cost.

Cost Curves

In the case of economics, a cost curve is a graph that portrays the costs of production as a major function of the total quantity produced. In the context of a free market economy, the competitively efficient firms are known to utilize the findings of these curves in order to ascertain the optimal point of production.

In addition, the profit maximization organizations can look to use the findings with an aim of deciding output quantities in order to achieve the substantial aims. There are different types of cost curves that are applicable to the short run while there are some curves that are more applicable to the long run (Besanko, Dranove, Shanley, & Schaefer, 2009).

The average total cost curve is made with an aim to ascertain the association between the level of output and the cost per unit of output with the presence of ceteris paribus. This type of curve is highly significant for organizations in deciding about the various output levels to adopt while accomplishing the aim of optimum production.

Optimum production cannot be augmented without the analysis of these curves and thus performing such an economical analysis goes a long way in deciding about the level of optimum ...