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RESOURCE ALLOCATION: The process of dividing up and distributing available, limited resources to competing, alternative uses that satisfy unlimited wants and needs. Given that world is rampant with scarcity (unlimited wants and needs, but limited resources), every want and need cannot be satisfied with available resources. Choices have to be made. Some wants and needs are satisfied, some are not. These choices, these decisions are the resource allocation process. An efficient resource allocation exists if society has achieved the highest possible level of satisfaction of wants and needs from the available resources AND resources can not be allocated differently to achieve any greater satisfaction.
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Lesson 15: Cost | Unit 1: The Basics
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Page: 4 of 24
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In this unit, you should have learned about:- A review of the opportunity cost concept that plays a key role in the analysis of market supply.
- The difference between explicit opportunity cost and implicit opportunity cost.
- Two types of cost -- economic cost, which is all opportunity cost, and accounting cost, which includes only out-of-pocket expenses.
- The three types of profit -- economic profit, accounting profit, and normal profit.
- Economic profit as the difference between revenue and economic cost.
- Accounting profit as the difference between revenue and accounting cost.
- Normal profit as the opportunity cost of using entrepreneurship.
- That normal profit is the key difference between accounting profit and economic profit.
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LONG-RUN MARGINAL COST The change in the long-run total cost of producing a good or service resulting from a change in the quantity of output produced. Like all marginals, long-run marginal cost is an increment of the corresponding total. It is the change in long-run total cost divided by, or resulting from, a change in quantity. Long-run marginal cost is guided by returns to scale rather than marginal returns.
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The earliest known use of paper currency was about 1270 in China during the rule of Kubla Khan.
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"The greatest things ever done on Earth have been done little by little. " -- William Jennings Bryan
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VC
Variable Cost
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