A Firm's Long Run Cost Is the Cost of Production

question 420

Multiple Choice

A firm's long run cost is the cost of production when the firm

• A) calculates its cost at least one year into the future.
• B) adds together all of its short run costs.
• C) uses the economically efficient quantities for its plant and its labor.
• D) can vary the amount of output it produces.

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Definitions:

Cash Break-Even

The point at which a business's cash inflows exactly match its cash outflows, exclusive of financing, indicating no net cash gain or loss.

Straight-Line Depreciation

A tactic for apportioning the cost of a physical asset over its effective lifespan in identical yearly expenditures.

Fixed Costs

Expenses that do not change with the level of goods or services produced over a short period.

Operating Cash Flow

A measure of the amount of cash generated by a company's normal business operations, indicating whether a company can generate sufficient positive cash flow to maintain and grow its operations.