Question

"Match the alternative linear cost function with the definition given.

1) A cost function in which total cost change in proportion to the changes in the level of activity in the relevant range.

2) A cost function in which total cost do not change with changes in the level of activity in the relevant range.

3) A cost function that has both fixed and variable elements. Total cost change but not in the proportion to the changes in the level of activity in the relevant range.

A) Fixed Cost Function

B) Mixed Cost Function

C) Variable Cost Function"

Answer 1

The definitions given match with C) Variable Cost Function, A) Fixed Cost Function, and B) Mixed Cost Function respectively, which are key concepts for businesses analyzing production expenses.

Step-by-step explanation:

We'll match each definition with the correct alternative linear cost function:

1. A cost function in which total cost change in proportion to the changes in the level of activity in the relevant range. This is a C) Variable Cost Function.
2. A cost function in which total cost do not change with changes in the level of activity in the relevant range. This describes a A) Fixed Cost Function.
3. A cost function that has both fixed and variable elements. Total cost change but not in the proportion to the changes in the level of activity in the relevant range. This is known as a B) Mixed Cost Function.

Understanding these cost functions is essential for businesses to analyze and predict expenses as they relate to production levels.