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Economic Cost Types

Distinguish between the following types of costs:

a) Historical Cost and Replacement Cost

b) Opportunity cost and out-of-pocket cost

c) Incremental cost and Sunk cost

Solution Preview

a) Historical cost is the original cost of an asset at the time of purchase. Replacement cost is resale value of the asset today if it was purchased today.

b) Opporutnity cost is the value of the choice that was ...