Asked by Akyaira Stinson on May 31, 2024
Verified
A firm has a short-run cost function c(y) 3y 14 for y 0 and c(0) 10.The firm's quasi-fixed costs are
A) $10.
B) $4.
C) $9.
D) $14.
E) They are not possible to determine from this information.
Short-Run Cost Function
A representation of how total production costs change with output levels in the short term, when some factors are fixed.
Quasi-Fixed Costs
Costs that are not directly variable with the level of output but can change over time with scale of operations, such as salaries for permanent staff.
Positive Output
Production of goods or services in a quantity that exceeds zero.
- Absorb the fundamentals of cost functions and their sensitivity to fluctuations in output rates.
- Determine quasi-fixed costs from given cost function information.
Verified Answer
ZK
Zybrea KnightJun 03, 2024
Final Answer :
B
Explanation :
Quasi-fixed costs are the fixed costs that vary with the level of output. In this case, the only fixed cost is c(0) = 10. Thus, the quasi-fixed costs are the difference between the total fixed cost and the fixed cost at zero output, divided by the level of output at which the fixed cost equals zero.
Quasi-fixed costs = (c(y) - c(0))/y = (3y + 14 - 10)/y = 4/y
Therefore, the quasi-fixed costs are decreasing as output increases. At y=1, quasi-fixed costs are 4; at y=2, quasi-fixed costs are 2; and so on. The only answer choice that is a possible quasi-fixed cost is B) $4.
Quasi-fixed costs = (c(y) - c(0))/y = (3y + 14 - 10)/y = 4/y
Therefore, the quasi-fixed costs are decreasing as output increases. At y=1, quasi-fixed costs are 4; at y=2, quasi-fixed costs are 2; and so on. The only answer choice that is a possible quasi-fixed cost is B) $4.
Learning Objectives
- Absorb the fundamentals of cost functions and their sensitivity to fluctuations in output rates.
- Determine quasi-fixed costs from given cost function information.