Which of the Following Statements Regarding a Firm's Long-Run Average

question 187

Multiple Choice

Which of the following statements regarding a firm's long-run average total cost (LRATC) curve and its short-run average total cost (SRATC) curve is true?

• A)The shape of the LRATC is affected by the law of diminishing returns.
• B)The SRATC, but not the LRATC, can be used by a firm's managers for planning.
• C)The LRATC shows the lowest cost at which a firm is able to produce a given level of output when no inputs are fixed.
• D)The contribution of average fixed cost to LRATC is greater than its contribution to SRATC.

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Definitions:

Loss on Disposal

Loss on disposal occurs when the proceeds from the sale of an asset are less than its carrying amount on the books, resulting in a financial loss.

Bad Debt Expense

An expense reported on the income statement, representing the amount of uncollected receivables from customers during a period.

Gross Profit

Gross profit is the difference between sales revenue and the cost of goods sold before deducting overheads, interest, taxes, and other expenses.

Net Income

The amount of profit left after all operating expenses, taxes, and interest have been deducted from total revenue.