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Short Questions: What Is The Difference Between Scarcity and Shortage? Scarcity

Scarcity refers to limited resources to meet unlimited wants, while shortage is a temporary unavailability of goods or services. Accounting profit is total revenue minus expenses, while economic profit subtracts opportunity costs. Explicit costs involve direct payments, while implicit costs do not involve payments but represent opportunity costs of internal resources. Sunk costs cannot be recovered but were incurred in the past, while fixed costs do not vary with production levels. Economies of scale provide cost advantages as fixed costs are spread over more units, while diseconomies of scale occur when costs increase with higher output levels due to challenges of large scale operations.

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100 views2 pages

Short Questions: What Is The Difference Between Scarcity and Shortage? Scarcity

Scarcity refers to limited resources to meet unlimited wants, while shortage is a temporary unavailability of goods or services. Accounting profit is total revenue minus expenses, while economic profit subtracts opportunity costs. Explicit costs involve direct payments, while implicit costs do not involve payments but represent opportunity costs of internal resources. Sunk costs cannot be recovered but were incurred in the past, while fixed costs do not vary with production levels. Economies of scale provide cost advantages as fixed costs are spread over more units, while diseconomies of scale occur when costs increase with higher output levels due to challenges of large scale operations.

Uploaded by

StoryKing
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Short Questions

What is the difference between scarcity and shortage?


SCARCITY
Scarcity means that there is a limited quantity of resources to meet unlimited wants and needs.
1. embodies the economic truism that economic resources are limited
2. It is an economic phenomenon which is permanent in nature

SHORTAGE
Shortage is a situation where a good or a service is temporarily unavailable.
1. temporary situation
2. It occurs when the supply of goods and services runs low resulting from a greater demand on
the part of the consumer.

Difference between account and economic profit?


Account Profit
Accountants measure the accounting profit as the firms total revenue minus only the firms explicit
costs.
Accounting Profit = Total Revenue Total Expenses

Economic profit
Economists measure a firms economic profit as total revenue minus total cost, including both explicit
and implicit costs.
Economic Profit = Total Income Total Expenses Opportunity Lost Cost

Differentiate between explicit and implicit cost?


Explicit cost
An explicit cost is a direct payment made to others in the course of running a business, such as wage,
rent and materials, as opposed to implicit costs, which are those where no actual payment is made.

Implicit cost

An implicit cost is any cost that has already occurred but is not necessarily shown or reported as a
separate expense. It represents an opportunity cost that arises when a company allocates internal
resources toward a project without any explicit compensation for the utilization of resources.

Differentiate between sunk vs fixed cost?


Sunk Cost
A sunk cost is a cost that has already been incurred and cannot be recovered. Sunk costs (also known as
retrospective costs) are sometimes contrasted with prospective costs, which are future costs that may
be incurred or changed if an action is taken.

Fixed cost
A fixed cost is a cost that does not change with an increase or decrease in the amount of goods or
services produced or sold. Fixed costs are expenses that have to be paid by a company, independent of
any business activity.

Economies vs diseconomies?
Economies of scale
Economies of scale are the cost advantages that enterprises obtain due to size, output, or scale of
operation, with cost per unit of output generally decreasing with increasing scale as fixed costs are
spread out over more units of output.
Diseconomies of scale
Diseconomies of scale is an economic concept referring to a situation in which economies of scale no
longer functions for a firm. With this principle, rather than experiencing continued decreasing costs and
increasing output, a firm sees an increase in marginal costs when output is increased.

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