Answer to Question #199041 in Microeconomics for Sofo

Question

n economics, the cost of production is defined as the expenditures incurred to obtain the factors of production such as labor, land, and capital that are needed in the production process of a product. Explain the following in relation the total cost in economics

i. A firm pays its accountant an annual allowance of $10,000. Is this an economic cost? Explain AN, 5MARKS

ii. The owner of a small retail store does her own accounting work. How would you measure the opportunity cost of her work?

EV,5MARKS

20 Marks

Question 2

Answer 1

(I)This an economic cost. This is because the payment is a monetary transaction whereby the accountant is paid for trading his or her time. This is an explicit cost of purchasing accountant services hence it is an economic cost.

(ii) By determining the opportunity cost of the​ owner's accounting work.

The opportunity cost of the​ owner's accounting work is the monetary amount that her time would have been worth in its next best use.