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URUGUAY ROUND: The eighth and final round of General Agreement on Tariffs and Trade (GATT) negotiations that is most noted for establishing the World Trade Organization (WTO) to replace GATT. The Uruguay round began in 1986 and was concluded in 1994. In addition to establishing the WTO, the Uruguay round also sought to reduce tariffs and trade restrictions among member countries.
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                           ECONOMIC COST: An alternative term for opportunity cost, which is the highest valued alternative foregone in the pursuit of an activity. Opportunity cost, or economic cost, is one of the most fundamental concepts used in the study of economics, hence the reason it is also termed economic cost. Economic, or opportunity cost is also commonly termed just cost. The term economic cost is often used synonymously with opportunity cost. Replacing "opportunity" with "economic" serves to punctuate the central role opportunity cost plays in economics. It also distinguishes "cost" as used in economics, with "cost" as used in other disciplines, like accounting.Starting With ScarcityThe ultimate source of economic cost is the pervasive problem of scarcity (unlimited wants and needs, but limited resources). Whenever limited resources are used to satisfy one want or need, an unlimited number of other wants and needs remain unsatisfied. Hence pursuing one activity means alternatives are not pursued. Herein lies the essence of economic cost. Doing one thing prevents doing another.Because economist like to economize on effort, the succinct term cost is also frequently used in lieu of opportunity cost or economic cost. In fact, whenever the term cost is used in economics, absent of any modifiers, it inevitably means economic or opportunity cost. Accounting CostThe primary contrast to economic cost is accounting cost. An accounting cost is an actual outlay or expense incurred in production that shows up in a firm's accounting statement or other records. However, every accounting cost tracked by a firm is not necessarily an economic or opportunity cost. Moreover, every economic cost incurred by a firm does not necessarily show up as an accounting cost.Consider a few examples. - Accounting Cost, Not Economic Cost: In some cases, an accounting cost recorded by a firm does not reflect an economic or opportunity cost. In other words, there is no foregone satisfaction. The recorded item, more often than not, is actually economic profit, revenue that is earned in excess of economic cost.
An example is provided by Winston Smythe Kennsington III, the Chief Executive Officer of OmniConglomerate, Inc. Winston receives an annual "salary" of $10 million. This $10 million salary is recorded as an accounting cost by the firm. While he is an excellent leader, this salary exceeds his opportunity cost. If he were not head of OmniConglomerate, his next best alternative is to assume CEO status of MegaCorp International at a $5 million annual salary. As such, only half of Winston's $10 million salary is an economic cost, the other half is actually economic profit.
- Economic Cost, Not Accounting Cost: In some cases an economic cost incurred by a firm is not recorded as an accounting cost. In other words, there is foregone satisfaction, but this economic cost never makes it to the firm's records. For many firms, this untracked cost falls under the heading of normal profit, the opportunity cost of entrepreneurship. However, the cost of other resources can also go unrecorded.
Consider the situation facing Manny Mustard's House of Sandwich. Manny Mustard, the owner and proprietor of this restaurant, supplies his own time, effort, equipment, and organizational skills to the successful operation of this business. When the day is done, Manny subtracts his out-of-pocket expenses (for condiments, electricity, hired staff, and the like) from the revenue received. This is his income, which he probably considers the firm's profit. However, included within this "profit" is unrecorded economic cost for his labor, capital, land, and entrepreneurship.
Recommended Citation:ECONOMIC COST, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2021. [Accessed: January 16, 2021].
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Today, you are likely to spend a great deal of time browsing through a long list of dot com websites trying to buy either a key chain with a built-in flashlight and panic button or a green and yellow striped sweater vest. Be on the lookout for deranged pelicans.
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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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"Good humor is a tonic for mind and body. It is the best antidote for anxiety and depression. It is a business asset. It attracts and keeps friends. It lightens human burdens. It is the direct route to serenity and contentment." -- Grenville Kleiser, Author
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AAT
Association of Accounting Technicians
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