Question

A company manufactures small refrigerators. The cost relationship between the number of refrigerators and the total cost is assumed to be linear. What assumptions are we making when we model the cost function as linear?

A. That the cost of the function will be exponential.
B. That there are no fixed costs.
C. That the cost per refrigerator remains constant.
D. That the company will always produce the same number of refrigerators.​

Answer 1

C. That the cost per refrigerator remains constant. When modeling the cost function as linear, we assume that the cost per refrigerator remains constant and there are no fixed costs.

Step-by-step explanation:

When we model the cost function as linear, we are assuming that the cost per refrigerator remains constant. This means that the cost to produce each refrigerator does not change as the number of refrigerators produced increases or decreases. The assumption of a linear cost function also implies that there are no fixed costs. Fixed costs are costs that do not change with the level of production, such as rent or salaries.

Answer 2

When we model the cost function as linear, we assume that the cost per refrigerator remains constant option C.

Step-by-step explanation:

When we model the cost function as linear, we are assuming that the cost per refrigerator remains constant. This means that for every additional refrigerator produced, the cost will remain the same. This assumption allows us to create a linear relationship between the number of refrigerators and the total cost.

For example, if producing 10 refrigerators costs $1000, then producing 20 refrigerators would cost $2000, assuming a constant cost per refrigerator.