A Group of Business People Are Having Coffee

question 5

Multiple Choice

A group of business people are having coffee. Which of the following quotations describes economies of scale?

• A)"The new production process we've installed uses less capital and labour than the old one."
• B)"The new assembly line has higher capital costs, but the fall in workers' hours has lowered overall costs."
• C)"The costs of per-unit production have fallen dramatically as we have increased the length of the production runs."
• D)"Despite the higher costs of negotiating the contracts, hiring the cleaning firm is much cheaper than using our own staff."
• E)"The computer servicing people we have hired work very well as an integrated problem-solving group."

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Definitions:

Return on Assets Ratio

An indicator of how profitable a company is relative to its total assets, measuring the efficiency of asset use.

Operating Income

The income produced from the normal operations of a company, subtracting operating expenses from gross profit.

Average Total Assets

A measure used to evaluate a company's efficiency and profitability, calculated by averaging the total assets at the beginning and end of an accounting period.

Stockholders' Equity

The portion of a company's assets that belongs to shareholders after deducting liabilities, representing ownership interest.