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Microeconomics Question from Walter E. Williams:Edit

Armen Alchian's definition of costs differs from the standard textbook definition. What is the difference? Explain how his definition may be better. Why does he use capital values in his measurement of costs?

AnswerEdit

Alchian’s definition of cost: the most valuable forsaken opportunity. The difference is that Alchian defines cost using an opportunity cost definition. He uses capital values in his measurement of costs over time since they represent current as well as future opportunity costs.

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