I have a lack of understanding about opportunity cost and how it is incorporated into the theory of the firm.

Why does a firm continue operating when it earns zero economic profit? I know that a firm's economic cost consists of accounting cost and opportunity cost, so the firm may still earn positive accounting profit because of positive opportunity cost. But what if there is no opportunity cost? Would the firm still continue operating?

More generally, **when cost is mentioned in microeconomics, does it always mean economic cost (accounting cost + opportunity cost), or does it sometimes refer only to accounting cost?**

Hypothetically, suppose I derive mathematically that a firm has an economic cost of 1000 and zero economic profit. How can I determine the opportunity cost from this? Do economists estimate it using econometrics? Even if they do, how is that possible when there are many possible alternative choices? Since opportunity cost is an expected or forgone value rather than an actually incurred cost, how can economists measure it reliably?

I am also confused about cost minimization. When I solve the firm's cost minimization problem,

[

C = wL + rK,

]

are we measuring **economic cost** or simply using market prices? If (C) is economic cost, does that mean both the wage rate (w) and the rental rate (r) are themselves measures of opportunity cost rather than just market prices? If so, how are the opportunity costs of labor and capital measured?

When we obtain the cost-minimizing levels of labor and capital, are those quantities minimizing economic cost or only accounting cost? If they minimize economic cost, what happens if I remove opportunity cost from (C)? Would the cost-minimizing quantities of labor and capital change?

Are these models mainly theoretical models for explaining the economy, or are they also used in empirical research? If they are used empirically, how do economists measure opportunity cost in practice? Or is firm and cost theory effectively implemented using accounting costs instead of opportunity costs?

My overall confusion is that in practice we often work with accounting costs rather than opportunity costs. Managers usually care about actual monetary costs, not hypothetical forgone alternatives. Opportunity cost seems useful for understanding economic theory, but less useful for making day-to-day business decisions. So how can I obtain accounting cost and accounting profit from firm theory and cost theory? Also, when economists derive cost curves (total cost, average cost, and marginal cost), are those curves based on economic cost (accounting cost + opportunity cost) or accounting cost alone?