If Long-Run Average Total Cost Decreases as the Quantity of Output

question 38

Multiple Choice

If long-run average total cost decreases as the quantity of output increases, the firm is experiencing

• A)economies of scale.
• B)diseconomies of scale.
• C)coordination problems arising from the large size of the firm.
• D)fixed costs greatly exceeding variable costs.

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Definitions:

Allocated

The process of assigning or distributing resources or costs to various departments or accounts based on a specific criterion.

Volume Variance

The difference between the actual volume of production and the standard or budgeted volume, impacting the total costs.

Capacity Percentage

A measure of the extent to which a company or a production facility is using its total available capacity.

Budgeted Overhead

An estimate of the indirect costs or overheads that a business expects to incur during a specific period.