The internal structure and the functional representation of capital-adjustment costs

In this essay, the theoretical difficulties that characterize the functional representations of costs of capital adjustments are stated. These difficulties are removed by analysing the internal structure of such functional representations. A general function is presented where its possible curvatures and economic conditions that give rise to them are stated and analysed for a control-theoretic choice. A general cost of capital function is derived. An example is given to illustrate its industrial, engineering and economic applications.