The key assumption required for us to use a linear variable cost function of the form VC = bq is that:
A) marginal cost must be constant and equal to b.
B) marginal cost must be increasing at rate b.
C) fixed costs must be zero.
D) marginal cost is always greater than average variable cost.

Question

Quizplus · Accepted Answer

The linear variable cost function of the form VC = bq assumes that marginal cost is constant and equal to b. This allows us to use a linear function to represent the relationship between variable costs and the level of output.

The Key Assumption Required for Us to Use a Linear