accounting versus economic valuation Ralph is pondering the difference between economic and accounting descriptions of financiallife. Provide three explicit examples, one where a good guess is economic value exceeds accounting value, one where accounting value exceeds economie value, and one where they are about equal. In each case identify the accounting recognition rules that produce the particular bias, or lack of it, in the accounting valuation. values, even when markelS are less than perfect. The distinction between accounting and economic rates of return on capital is a central concem in this area. We wiIl have more to say about this issue later in the text.

22An additional pressure on the product versus period cost distinction is the fact a multiproduct tinn has no natural way to assign cost to products. Remember, average cost is undefined here (absent some form of extreme separability in the economic structure). Dealing with the same product at different jXlints in time is, itself, a multiproduct story. It is no accident the economist focuses on the total cost curve and marginai cost of the various produclS.

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