How do economists measure cost?

Cost of Production

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Businesses are typically in the business of producing goods and services, with profit as their primary objective. To produce a product they incur costs as they use economic resources. When they sell their products they obtain revenue. The difference between revenue and costs is profit. There is a difference between the accountants' concept of costs and the economists' concept of costs. Accountants measure the outlays of money on the purchase of resources. Economists also add the opportunity cost of self-owned resources, like the value of the owner's time and the potential return on the owner's capital in alternative uses. This difference between accountants and economists in determining the cost of production obviously also affects the measured profit. In this part we will be discussing different cost measurements in economics.