Accounting costs and economic costs differ because

Question

Quizplus · Accepted Answer

Accounting costs only include explicit costs that are recorded in financial statements while economic costs include both explicit and implicit costs. Implicit costs refer to the opportunity cost of using a resource for a particular activity instead of using it for its next best alternative use. Thus, economic costs are always greater than accounting costs as they take into account the forgone opportunities.

Accounting Costs and Economic Costs Differ Because