What does a PPC represent?
Term. Definition. production possibilities curve (PPC) (also called a production possibilities frontier) a graphical model that represents all of the different combinations of two goods that can be produced; the PPC captures scarcity of resources and opportunity costs.
When the work required to produce a good or service is divided into tasks that are performed by different workers that is called?
In the first chapter, Smith introduces the division of labor, which means that the way a good or service is produced is divided into a number of tasks that are performed by different workers, instead of all the tasks being done by the same person.
What is the classic example Economists often use to explain production possibilities in economics?
What is the classic example economists often use to explain production possibilities in economics? Spending on military goods (guns) versus civilian goods (butter)
What term is best described as a cost that was made in the past and Cannot be recovered?
Sunk Costs. Costs that are made in the past and cannot be recovered.
Which cost is already incurred?
The sunk cost is that cost which has already been incurred and can not be recovered. Sunk cost is considered irrelevant in future decision making as this has already been incurred.
What is sunk cost with example?
A sunk cost refers to a cost that has already occurred and has no potential for recovery in the future. For example, your rent, marketing campaign expenses or money spent on new equipment can be considered sunk costs.
Is advertising a sunk cost?
A sunk cost is a cost that has already been spent but not recoverable in any case, and future business decisions should not be affected by past spent. Spending on researching, equipment or machinery buying, rent, payroll, marketing, or advertising expenses is the main example of sunk cost.
What is the difference between sunk cost and fixed cost?
Sunk costs and fixed costs are two different types of costs. A sunk cost is always a fixed cost because it cannot be changed or altered. A fixed cost, however, is not a sunk cost, because it can be stopped, for example, in the sale or return of an asset.
Which represent sunk costs?
A sunk cost refers to money that has already been spent and which cannot be recovered. A sunk cost differs from future costs that a business may face, such as decisions about inventory purchase costs or product pricing.
What is an example of a fixed cost?
Examples of fixed costs include rental lease payments, salaries, insurance, property taxes, interest expenses, depreciation, and potentially some utilities.
What is a committed cost?
A committed cost is an investment that a business entity has already made and cannot recover by any means, as well as obligations already made that the business cannot get out of. One should be aware of which costs are committed costs when reviewing company expenditures for possible cutbacks or asset sales.
What is sunk cost and opportunity cost?
Opportunity cost is the cost of a missed opportunity i.e.: the profit/gain foregone when choosing one business alternative over another. Sunk cost represents past costs that have already been incurred and cannot be recovered.
What is the another name for opportunity cost in economics?
The alternative name of opportunity cost is Economic cost.
What is the law of increasing opportunity costs and why is it true?
The law of increasing opportunity cost is the concept that as you continue to increase production of one good, the opportunity cost of producing that next unit increases. Therefore, the cost is losing more units of the original good to produce one more of the new good.