A company uses the power-law model Y = A X B Y=AXB to scale equipment cost with capacity, where 0

Question

A company uses the power-law model Y = A X B Y=AXB to scale equipment cost with capacity, where 0 < B < 1 0 1 B>1 is not typically observed in capital cost estimation for engineering equipment?

Accepted Answer

Because it would imply diseconomies of scale, where doubling capacity more than doubles the cost.

Answer

Because it would imply decreasing marginal costs as capacity increases.

Answer

Because it would result in cost decreasing with scale, violating the time value of money.

Answer

Because power-law models require  B < 0 B<0  to reflect inflation effects.

Crowdly

A company uses the power-law model Y = A X B Y=AXB to scale equipment cost wit...

Want instant access to all verified answers on learning.monash.edu?