accounting cost - actual expenses, plus depreciation  

• more concerned with past performance
• depreciation expenses calculated for capital equipment
• more connected to the IRS than economic cost

economic cost - cost of utilizing all resources in production  

• more forward-looking view of the firm
• concerned w/ what cost will be in the future
• associated w/ forgone opportunities, includes opportunity cost
• talks about all the costs/resources that the firm can control/change

opportunity cost - sometimes synonymous w/ economic cost  

• unused opportunities treated as costs (since firms not using resources in the most efficient way)
• monetary transaction may be absent, but opportunity still there
  • for example, company owns a building or space that it doesn't use. since they could've have rented it out or sold it, this is an opportunity cost
  • for example, store owner doesn't pay herself, but could have or worked for money elsewhere, so this becomes an opportunity cost
• hidden, but need to be considered in economic decisions

sunk cost - shouldn't be taken into account in economic decisions  

• expense that has been made and can't be recovered
  • visible and recorded, but shouldn't be considered for decisions
• certain specialized equipment can't be converted to do any other tasks >> sunk cost when unused
  • has opportunity cost of 0 since you can't use them for anything else
• prospective sunk cost - hasn't been made yet
  • considered an investment, economical if it can generate enough profit to cover its expense

total cost - made up of fixed and variable cost  

• fixed cost (FC) - cost that doesn't vary w/ output
  • paid even when output is 0
  • only removed when firm goes out of business
  • different from sunks costs since sunk costs can't be recovered even when the firm goes out of business
• variable cost (VC) - varies w/ output, dependent on Q