Increasing Returns to Scale

question 6

Multiple Choice

Increasing returns to scale

• A) means that output rises proportionately less than inputs, increasing per unit cost of production in the short run.
• B) means that output rises proportionately more than inputs, resulting in increasing per unit costs.
• C) implies that the long- run average cost curve is shifting downward.
• D) has the same meaning as increasing costs of production.
• E) means that output rises proportionately more than inputs, resulting in lower per unit costs in the long run.

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Definitions:

Manufacturing Overhead

All indirect costs associated with the manufacturing process, such as utilities, maintenance, and factory management salaries.

Materials Quantity Variance

The difference between the actual quantity of materials used in production and the standard quantity expected, multiplied by the standard cost per unit.

Direct Material Standards

The predetermined cost and quantity of materials required for the manufacturing of a product.

Purchases Variance

A financial metric used to measure the difference between the actual cost of purchased materials and the planned or standard cost.