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I was working on a question that asked the opportunity costs of going to college per year given that college tuition is $ x $ and the salary per year is $ y $. The answer given is $ x + y $.

I thought that economic costs is given by: $$ \text{Economic costs} = \text{Accounting costs} + \text{Opportunity Costs} $$

Here, the accounting costs would be the explicit cost of tuition, while the opportunity cost would be the implicit cost of wages foregone.

Is my conclusion correct? Or is economic costs synonymous with opportunity costs? (Which makes opportunity cost equal to the total cost, explicit + implicit)?

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In economics, we argue that there is only one correct way to think of costs. And so, the adjectives economic or opportunity in front of the word cost are actually superfluous — the terms cost, true cost, economic cost, and opportunity cost are all exact synonyms.


Note. If they are superfluous, then why do we use these adjectives?

One reason is to strongly emphasize that other conceptions of "cost" that accountants and other non-economists use (e.g. accounting costs, historic costs) are not quite correct.

Another reason is that in practice, it may be difficult to figure out what the true cost or opportunity cost is. And so in practice, economists will — despite what they themselves teach in Econ 101 — often use the term cost in some narrower, incorrect sense.

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  • $\begingroup$ sounds like an extremely over-simplified way of looking at it. various costs will come into consideration for certain situations while certain other costs would not. In those situations, all costs are not really the same. It completely depends on what perspective you are taking and what your goals are for the analysis. $\endgroup$ – agent provocateur Apr 18 at 23:42
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You have it dead on! There opportunity cost is the next best alternatives that you forgo when you decide (in this example) to go to college. Because there is always some opportunity cost to every decision, economists say that there is no such thing as a free lunch

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