A Constant Elasticity Cost Function

question 43

Multiple Choice

A constant elasticity cost function

• A) takes a form such as TC = a Q^b w^c r^d and is useful in empirical work because it can be converted into a linear form using logarithms.
• B) takes a form such as , where L and K are chosen to minimize cost, and w and r are input prices.
• C) takes a form such as TC = a Q² + KL.
• D) is given by TC = AC x Q.

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Definitions:

Factory Supervisor

An individual responsible for overseeing the operations and workers in a factory, ensuring production targets and quality standards are met.

Wages

Payments made to employees for their labour or services, typically calculated on an hourly, daily, or weekly basis.

Direct Materials

The raw materials directly traceable to the production of specific goods or services, considered a variable cost.

Period Cost

Expenses that are not directly tied to the production of goods, such as selling, general, and administrative expenses, which are expensed in the period incurred.