Much of the Empirical Evidence on the Behavior of Costs

question 55

Multiple Choice

Much of the empirical evidence on the behavior of costs for real-world firms suggests that:

• A)average costs functions are U-shaped as suggested by economic theory.
• B)for most firms, marginal costs are declining in the range in which the firms operate.
• C)for many firms, marginal and average variable costs are constant over wide ranges of output.
• D)there is no relationship between the marginal and average variable costs of production.

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Definitions:

Normal Credit Balance

The usual balance side of an account, considered a credit for liability, revenue, and equity accounts.

Sales Discounts

A reduction from the gross or total price of goods or services offered by the seller to the buyer under certain conditions.

Liquidity

A measure of how quickly and easily assets can be converted into cash without significant loss in value.

Accounts Receivable

Funds that clients owe to a company for products or services delivered on credit.