In the Short Run Average Costs Eventually ________ Because of Diminishing

question 229

Multiple Choice

In the short run average costs eventually ________ because of diminishing returns, and in the long run average costs eventually ________ because of diseconomies of scale.

• A) increase; increase
• B) increase; decrease
• C) decrease; increase
• D) decrease; decrease

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Definitions:

Product Margins

The difference between the selling price of a product and the cost associated with producing it, indicating the profit generated per product sold.

Overhead Cost

Expenses not directly tied to production, such as rent, utilities, and administrative salaries.

Product S1

A designated product, referred to as S1, typically used in examples or scenarios within the context of costing or managerial accounting.

Processing Batches

The group of items or materials processed together through the same production steps in a batch production process.