Table 11-7 Table 11-7 Shows Cost Data for Lotus Lanterns, a Producer

question 93

Multiple Choice

Table 11-7

Table 11-7 shows cost data for Lotus Lanterns, a producer of whimsical night lights.
-Refer to Table 11-7.What is the average total cost of production when the firm produces 120 lanterns?

• A)$1,680
• B)$72
• C)$14
• D)$12.3

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Definitions:

Fixed Costs

Costs that do not change with the level of production or output in the short term, such as rent or salaries.

Minimum Efficient Scale

Minimum efficient scale represents the smallest amount of production a company can achieve while still taking full advantage of economies of scale in terms of costs per unit.

Industry

A group of companies that produce similar products or services and compete in the same market.

Diseconomies of Scale

Increases in cost per unit when output increases, resulting from factors such as management challenges, inefficiencies, and communication problems as firms grow larger.