If a Firm Builds a Larger Plant and Constant Returns

question 100

Multiple Choice

If a firm builds a larger plant and constant returns to scale apply,which of the following statements is correct?

• A)The capacity output of the larger plant has a lower average cost.
• B)The capacity output of the larger plant has the same average cost.
• C)Economies of scale are present.
• D)LRAC will decrease as output increases.

---

Definitions:

Nonborrowed Source

A term referring to funds or resources that are not obtained through borrowing.

Franchise Fee

The one-time payment made to become a franchisee.

Venture Capitalist

An investor who provides capital to startup companies and small businesses with perceived long-term growth potential in exchange for equity.

One-Time Payment

A single transaction or payment made to settle a debt or purchase a product or service, without requiring recurring payments.