Question

A cost function is a mathematical description of how a cost changes with changes in the level of an activity relating to that cost.
True / False.

Answer 1

Answer:

True

Explanation:

Cost functions are descriptions of how a cost (i.e., material, labor, or overhead) changes with changes in the level of activity relating to that cost. For example, total variable costs will change in relation to increased activity, while fixed costs will remain the same. Cost functions may come in various forms. A cost function is a function of input prices and output quantity whose value is the cost of making that output given those input prices, often applied through the use of the cost curve by companies to minimize cost and maximize production efficiency .