Suppose the cost function of a firm showing the minimum cost of producing q units of output is given by C(q).Which of the following intuitively explains the cost function? I. The cost function summarizes the economically relevant production possibilities of the firm. II. The cost function incorporates both technological efficiency (using no more inputs than necessary to produce q) and opportunity cost of inputs.

MCQs on major topics and theories in the field of Industrial Organization. Topics include: Market structure analysis and the strategic behaviors of competing firms, including (but not limited to) product differentiation, collusion, price discrimination, pricing strategy, non-price discrimination (i.e. advertising), horizontal mergers, vertical integration, and vertical restraints.