What Types of Problems May Arise When Measuring Cost for Short-Run Cost Estimation? Why Are They Considered...

Short-run terms functions should be omend apply entropy for which the take of usage of one or more of the inputs is fixed. Usually time-series information for a specific substantial be used to estimate short-run cost functions. Analysts should be careful to adjust the cost and input price data (which are sum of moneyd in dollars) for puffiness and to make sure the cost data measure economic cost. The following are the two possible problems that whitethorn arise when measuring cost for short-run cost bringing close together:

Correcting data for the effects of inflation

Economic analyses often use data from two or more calendar years. Price inflation causes the value of a dollar to fall over time, and so the same dollar amount in two distinct years will usually represent different amounts of buy power. To counteract this problem, analysts typically adjust dollar figures to account for inflation. Figures that lead not been adjusted for inflation are said to be in nominal dollars, while those that gull been adjusted are in real dollars. This FAQ response describes how to adjust for inflation so that dollar determine are expressed in terms of a mavin years currency.
Inflation adjustments are made using price indices. distributively index consists of numbers representing the price level in distributively year relative to a base year.



Some indices have values that correspond to shorter periods as well, such as months or quarters. What distinguishes the indices is how the price levels are established.

Problems Measuring Economic Cost

The cost of using resources in production is the fortune cost of using the resources. Since score data are of necessity based on expenditures, opportunity cost may not be reflected in the strongs accounting records. Collecting data may be complicated by the fact that accounting data are based on expenditures and may not include the firms opportunity cost of using the various inputs. In particular, capital costs should reflect not only learnedness cost but also...If you want to get a integral essay, order it on our website: Ordercustompaper.com



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