economic cost

Definition

The total cost of choosing one action over another. The economic cost includes the accounting cost, or actual funds spent carrying out the action, and the opportunity cost, or the amount of money that could have been made by using funds and other resources dedicated to the action on some other objective.

Use economic cost in a sentence

The firm made a one percent return on its investment, but this did not cover its economic costs given that the risk free rate was three percent.

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The economic cost of choosing the closing of the factory over a revamp of the factory made it clear that they could not afford to rehabilitate the ancient building.

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The company decided to use an oak wood for their product however the economic cost of using this material meant that they would be able to afford less product despite producing a better overall product.

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