When You Produce Cars, It Is Enormously Expensive to Produce

question 64

Multiple Choice

When you produce cars, it is enormously expensive to produce one car, but ultimately the costs per car decrease as more are produced. This would be an example of:

• A) increasing marginal opportunity costs.
• B) decreasing marginal opportunity costs.
• C) constant marginal opportunity costs.
• D) increasing returns to scale.

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Definitions:

Operating Income

Earnings before interest and taxes (EBIT), representing a company's profit from regular operations, excluding non-operational income and expenses.

Retained Earnings

Profits that a company has earned to date, less any dividends or other distributions paid to shareholders.

Dividends

Payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders.

Net Income

The total profit of a company after all expenses and taxes have been deducted from revenue, indicating the company's bottom line.