When Average Costs of Production Drop as a Result of a Company

question 114

Multiple Choice

When average costs of production drop as a result of a company learning how to produce items more efficiently, this is known as:

• A) natural attrition.
• B) scale economies.
• C) scale diseconomies.
• D) experience curve.
• E) scope economies.

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Definitions:

Net Present Value

The calculation that compares the value of a dollar today to the value of that same dollar in the future, taking inflation and returns into account, often used to assess the profitability of an investment.

Tax Rate

The percentage at which an individual or corporation is taxed.

Payback Period

The duration of time it takes to recoup the cost of an investment.

Straight-Line Method

A depreciation method that allocates the cost of an asset evenly over its useful life.