THEORY OF COSTS

Abstract

This paper Defined the concepts of total, average and marginal costs; differentiate between accounting and economic costs, real and nominal cost, private and social cost, sunk and incremental cost; appreciate the necessity of proper identification of costs in business decision-making; illustrate the total, average and marginal cost curves for both the short run and the long run scenario; Elucidate on the determinants of each of internal and external economics of scale and appreciate the reasons for the L-shape of the long run average cost curve.