Give an example of an opportunity cost that an accountant would not count as a cost….


Chapter 13:
2/ Give an example of an opportunity cost that an accountant would not count as a cost. Why would the accountant ignore this cost?
An accountant would not count the owner’s opportunity cost of alternative employment as an accounting cost. An example is given in the text in which Caroline runs a cookie business, but she could instead work as a computer programmer. Because she’s working in her cookie factory, she gives up the opportunity to earn $100 per hour as a computer programmer (Mankiw, 2016, p. 249). The accountant ignores this opportunity cost because money does not flow into or out of the firm.
4/ Draw a production function that exhibits diminishing marginal product of labor. Draw the associated total-cost curve. (In both cases, be sure to label the axes.) Explain the shapes of the two curves you have drawn.

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