The short-run cost function is:
A) where all inputs to the production process are variable
B) relevant to decisions in which one or more inputs to the production process are fixed
C) not relevant to optimal pricing and production output decisions
D) crucial in making optimal investment decisions in new production facilities
E) none of the above

Question

Quizplus · Accepted Answer

The short-run cost function is relevant to decisions in which one or more inputs to the production process are fixed, such as when a business is trying to optimize production with limited resources. Therefore, option B is the best choice. Option A is incorrect because the long-run cost function contains all variable inputs. Option C is incorrect because short-run costs are relevant to optimal pricing and production output decisions. Option D is incorrect as the short-run cost function is not used in making investment decisions for new production facilities.

The Short-Run Cost Function Is