Basic Economic Concepts Quiz

Measuring Cost

• Economist considers the opportunity cost, which is the value of the next best alternative given up when choosing to use a resource in a particular way.
• Economist also considers the social cost, which includes the direct cost of production and the external costs borne by third parties.
• Additionally, economist considers the long-run costs, which are the costs associated with the production of goods and services over a long period of time.

Accounting Perspective

• Accountant typically measures cost using historical cost, which is the original cost of acquiring or producing an asset or resource.
• Accountant focuses on the direct cost of production, which includes the cost of labor, materials, and other resources directly involved in production.
• Accountant also considers the explicit cost, which is the out-of-pocket cost of production.

Opportunity Cost

• Opportunity cost represents the value of the next best alternative that is given up when choosing to use a resource in a particular way.
• Opportunity cost is not necessarily a monetary cost, but rather the value of the benefit that could have been obtained if the resource were used in an alternative way.
• Opportunity cost is a key concept in economics, as it helps decision-makers evaluate the trade-offs involved in making choices.

Test your knowledge of basic economic concepts, including opportunity cost, with this quiz. Challenge yourself to understand the sacrifices involved in making choices and the consideration of alternative courses of action from an economic perspective.