Costs and Opportunity Cost

1855 words 8 pages
* Nobel Prize–winning economist Ronald Coase noted,“The cost of doing anything consists of the receipts that could have been obtained if that particular decision had not been taken.” For example, the opportunity set for this Friday night includes the movies, a concert, staying home and studying, staying home and watching television, inviting friends over, and so forth.
The opportunity cost of taking job A included the forgone salary of $102,000 plus the $5,000 of intangibles from job B.

Opportunity cost is the sacrifice of the best alternative for a given action.

Public accounting firms confront this issue.

The car’s opportunity cost in the decision to keep it for resale is $7,200, but in matching expenses to revenues, the
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total cost = FC + VC × Q =
We should asset depreciation as an opportunity cost. Suppose a delivery van used four days a week can be sold next year for $34,000. If additional business is taken and the delivery van is used six days a week, its market value next year will be $28,000. Depreciation due to use for the additional business is $6,000 ($34,000 - $28,000) and the FC is increase.
Profit = Price*Q-total cost
Furthermore the total cost reducing is not mean the profit increasing. If as the number of productions increases the price decrease, the profit may be decrease too.
P 2–26: Eastern University Parking Eastern University faces a shortage of parking spaces and charges for parking. For nearby parking (e.g. behind the business school), faculty and staff pay $180 per year. Parking in lots Z and B, which are north and south of the campus and involve about a 10-minute walk to the business school, costs $124 per year. In setting these prices, the university seeks to recover the costs of parking and to manage the queue of people wishing to park on campus. The current $180 and $124 fees cover the costs of surface spaces. Lots Z and B have lower fees to compensate people for the longer walks and to encourage them to park in outlying lots. University officials say this fee structure, when multiplied by the number of parking stickers of each type sold, covers the cost of running the parking office and building new spaces. The

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