When a Firm with Constant Returns to Scale Uses 30

question 197

Multiple Choice

When a firm with constant returns to scale uses 30% more of all inputs and input prices remain unchanged,then

• A) total cost rises by less than 30%.
• B) average cost falls by 30%.
• C) total cost rises by more than 30%.
• D) average cost remains unchanged.
• E) average cost rises by 30%.

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Definitions:

Inventory Turnover

A measure of how frequently a company sells and replaces its stock of goods during a certain period of time, indicating the efficiency of inventory management.

Lower-Of-Cost-Or-Market

An accounting principle that values inventory at the lower of either its historical cost or its current market price.

Inventory Valuation

The method used to calculate the cost of goods available for sale and determining the ending inventory value for financial reporting purposes.

Ending Inventory

The value of goods available for sale at the end of an accounting period, calculated as beginning inventory plus purchases minus cost of goods sold.