My question is related to economics. What are real costs?

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Real costs, or true costs, reflect the negative and positive societal effects of producing an item. Another word for these effects is "externalities." Businesses rarely consider the externalities throughout the production process; they only think about the costs that directly affect them (fixed and variable expenses). For example, a club owner may only be interested in providing good music for their customers, without thinking about the negative effects of the noise on neighbors. In such a scenario, the real costs include the neighbor's medical bills in case the noise affects their hearing. For this reason, the government often intervenes to make sure that businesses don't disrupt others. Although some economists prefer a laissez-faire market approach, government intervention to control real costs is welcomed, since it shields the economy from the negative effects of externalities.

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The concept of real costs is an all encompassing idea.  From an economic point of view, real costs refers to the cost of producing a good or service, including the cost of all resources used and the cost of not employing those resources in alternative uses (see website link below.)  The idea of determining real cost helps manufacturers better understand how much money will be needed to generate a product in multiple domains.  For example, real costs would include, but not be limited to, production, market analysis, distribution, and advertising.  In this process, both total cost and overall value is determined and assessed.  This will help crystallize the vision of a product's profit and whether further investment is warranted.  In a real world setting, when one is determining the real cost of owning an automobile, they would have to factor in not only the purchase of the vehicle, but maintenance, gasoline/ petrol expenditures, insurance, renewal of title and ownership deeds, to name a few.  Real costs analysis gives a greater picture of a product and the spending associated with it.

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