In the cost function y = a + bx; the 'a' represents?Question 14Answera.Variable costb.Fixed costc.Semi-variable costd.Total cost

Break Down the Problem

1. Identify the components of the given cost function $y = a + bx$.
2. Understand the definitions of the terms provided in the answer choices.

Relevant Concepts

1. In the context of cost functions and economics, the term "a" represents the constant term in a linear equation, which typically shows a relationship between total cost and production output.
2. The answer options include different types of costs:
   • Variable cost: Costs that vary with the level of output.
   • Fixed cost: Costs that do not change with the level of output.
   • Semi-variable cost: Costs that have both fixed and variable components.
   • Total cost: The overall cost, including both fixed and variable components.

Analysis and Detail

1. In the equation $y = a + bx$:
   • $y$ is the total cost,
   • $a$ is the fixed cost (cost incurred regardless of production),
   • $b$ is the variable cost per unit of output,
   • $x$ is the level of output.

Verify and Summarize

• Since $a$ remains constant regardless of the quantity produced, it represents the fixed cost in the context of cost structures.

Final Answer

The correct answer is b. Fixed cost.