Which of the following statements about cost functions is most likely to be true

Question

Which of the following statements about cost functions is most likely to be true?


Variable costs will always increase in direct proportion to the quantity of output produced.

The less capital equipment employed in the production process relative to labor and other inputs, the longer will be the period of time required to increase significantly the scale of operation.

The shape of the firm's long-run cost function is important in decisions to expand the scale of operations.

When only one input is allowed to vary, the short-run average cost curve generally declines indefinitely as output increases.

Explanation / Answer

Variable costs will always increase in direct proportion to the quantity of output produced.

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