Which of the following cost functions exhibits cost complementarity? A) −4Q₁Q₂ + 8Q₁. B) −4Q₂ + 8Q₁. C) 6Q₁Q₂ − Q₁. D) 4Q₂Q₁ + 8Q₁.

Question

Quizplus · Accepted Answer

Cost complementarity occurs when the cost of producing two goods together is less than the cost of producing each good separately. Choice A exhibits cost complementarity because it includes a term that represents a reduction in cost when two goods (or services) are produced together, indicated by the multiplication of different factors (Q₁ and Q₂) which suggests a synergy or complementarity between the two.

Which of the Following Cost Functions Exhibits Cost Complementarity