Determining cost in IP routing

Answer 1

Determining the cost metric of a hop in a route can be done many different ways, depending on the protocol you are using. The simplest would be purely distance, which is what distance-vector protocols such as RIP will use.

You can get more complicated by using several factors, such as distance, speed of the link, traffic on the link, the actual router models used at both ends, etc. This is what link-state algorithms use, such as OSPF.