Major component firms

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Class, there are about 30 million businesses in the United States. Of which more than 25 million are small businesses. All businesses are profit maximizers.

Profit = Total Revenue - Total Cost.

As you can see, cost is a major component firms consider in maximizing their profit.

Costs are divided in to two parts: FIXED COSTS and VARIABLE COSTS.

To start with, what is your understanding of ACCOUNTING COST, ECONOMIC COST, FIXED COST, VARIABLE COST? Please provide examples. Why is it important for a business to identify its cost as fixed or variable?

Reference no: EM133131747

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