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Economic Cost

In a world of scarce resources, the pursuit of one opportunity does not leave other opportunities untouched. Due to scarcity, each production and consumption decision is a trade-off and has costs. There are different ways to conceptualize and measure costs. Typically, when lay people think of costs, they are considering accounting costs rather than economic costs. Accounting costs include monetary expenses, depreciation, and other bookkeeping debits and credits. However, economic cost also encompasses the next best use of an input. In other words, the economic cost of an input is the compensation necessary for an input to remain in a productive activity. Economic cost is an important but often ignored concept in education and education finance. Educational policymakers and administrators face trade-offs in the allocation ...

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