Keep Smiling Dental Surgery is located in Christchurch. The company employs three dentists, four dental assistants and two receptionists who book appointments and keep records. The surgery provides a range of services including general dental care, paediatric dental care and teeth whitening. The clinic includes a small retail section that carries specialised products for home treatment. Keep Smiling has recently secured a contract with the Christchurch branch of a major bank to treat their staff. Currently each dentist can treat 35 patients per week. However the new contract means that they will have a total of 100 patients per week. This means that they will need to employ an additional dentist to cope with the increased demand. No other changes are required to the surgery. The cost attached to employing a new dentist is an example of a:
A) stepwise linear cost function
B) marginal cost
C) mixed cost
D) variable cost

Question

Quizplus · Accepted Answer

The cost of employing an additional dentist due to an increase in demand is an example of a stepwise linear cost function, as it remains constant over a range of activity (the number of patients a dentist can see), then jumps to a higher level at a certain point (when a new dentist is needed to handle additional patients).

Keep Smiling Dental Surgery Is Located in Christchurch