Many Organizations Use a Linear Relationship with a Single Cost

question 94

Multiple Choice

Many organizations use a linear relationship with a single cost driver to describe a cost even though the cost may have multiple cost drivers.Why?

• A) This approach is easier and less expensive.
• B) The cost of developing a more complex function is greater than the benefit.
• C) Cost estimates from the simple function are accurate enough for most decisions.
• D) All of the above

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Definitions:

Differentiated Product

A product that is made distinct from similar products offered by competitors through unique features, quality, branding, or other attributes.

Monopolistic Competitor's

A market structure where many firms sell products that are similar but not identical, each having some control over its price due to product differentiation.

Long-run Demand Curve

A graphical representation that shows the quantities of a product or service consumers are willing to purchase at different prices over a period where all production factors can vary.

Excess Capacity

The situation in which a firm or economy can produce more goods or services than currently being produced due to unused resources, often leading to downward pressure on prices and profitability.