[amp_mcq option1=”fixed cost function” option2=”variable cost function” option3=”step variable cost function” option4=”step fixed cost function” correct=”option1″]
The correct answer is: A. fixed cost function.
A fixed cost is a cost that remains constant in total regardless of the level of output. For example, rent is a fixed cost for a business because it is the same amount each month, regardless of how many products the business sells.
A variable cost is a cost that changes in proportion to the level of output. For example, the cost of raw materials is a variable cost for a manufacturing business because it increases as the business produces more products.
A step variable cost is a cost that changes in discrete amounts as the level of output changes. For example, the cost of hiring a new employee is a step variable cost because it only occurs when the business reaches a certain level of output.
A step fixed cost is a cost that changes in discrete amounts as the level of output changes. For example, the cost of leasing a new office space is a step fixed cost because it only occurs when the business reaches a certain level of output.
In conclusion, a fixed cost function is a cost function that does not change in narrow ranges of activity. This is because fixed costs are constant in total regardless of the level of output.