An Organization Whose Capacity Is on That Portion of the Average

question 60

Multiple Choice

An organization whose capacity is on that portion of the average unit cost curve that falls as output rises

• A) has a facility that is below optimum operating level and should build a larger facility
• B) has a facility that is above optimum operating level and should build a smaller facility
• C) is suffering from diseconomies of scale
• D) has utilization higher than efficiency
• E) has efficiency higher than utilization

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Definitions:

Strictly Convex Preferences

Preferences that demonstrate a consumer's increasing marginal rate of substitution, indicating a strong preference for diversified bundles of goods over homogeneous bundles.

Indifference Curves

Graphs representing different bundles of goods between which a consumer is indifferent, showing the combinations of goods that provide the same level of utility to the consumer.

Marginal Utility

The additional satisfaction or utility a consumer gains from consuming one more unit of a good or service.

Competitive Equilibrium Price Ratio

The ratio of prices that ensures the equality of supply and demand in a competitive market, often used to observe relative price changes between commodities.