Running head: Module 4 Assignment
Jessica M Mayenda
Module 4 Assignment
EBS5032
March, 2021
Dr. Rameez Hassan
18th April, 2021
Module 4 Assignment
1) What costs are considered “relevant” and which are considered “irrelevant” to a
business decision. Explain why.
In making economic decisions, expense must be taken into account. It serves as the
foundation for making decisions. Related cost is the cost that makes a difference in a business
decision when comparing different options. Irrelevant cost, on the other hand, is a cost that
has little bearing on the decision-making process when comparing different options.
Irrelevant costs have little bearing on decision-making. Let’s say a company is still using an
old computer, and the depreciation cost isn’t a factor. Depreciation from previous years has
already been paid for and is a sunk expense. As a result, the old machine’s deterioration is
meaningless. However, when a business buys a new computer, the depreciation cost of the
machine is taken into account when making the decision.
The variable cost is important because it rises when the business decides to raise production.
The cost of a fixed factor, on the other hand, is irrelevant because it does not adjust as a result
of the firm’s decision to increase production.
2) Explain the relationship between a firm’s short-run production function and
its short-run cost function. Focus on the marginal product of an input and the
marginal cost of production.
Firms hold certain factors stable in the short run while varying the sum of other factors. The
costs of factors whose quantities are fixed are known as fixed costs, and the costs of factors
whose quantities are variable are known as variable costs. Since some variables in the
shortrun production function are fixed and others are variable, the costs in the shortrun are
