Now it's time to look at the cost to the firm of hiring the inputs used to produce a given level output. We start by looking at how economists differ from accountants in the way they look at a firm's costs.
Accountants are retrospective.
Economists are forward looking. The importance of this difference in perspective can be illustrated by looking at sunk costs , one category of explicit costs. A sunk cost is an expenditure that has already been made and cannot be recovered. From a retrospective point of view, the cost of all the inputs purchased must be taken into consideration when making production decisions. To accountants, using a building already owned by Northwestern meant no new cost to the University.