When It Takes One Firm in an Industry to Produce

question 188

Multiple Choice

When it takes one firm in an industry to produce the quantity necessary to realize low unit costs, the industry

• A) experiences economies of scale.
• B) has barriers to entry due to ownership of resources.
• C) has no barrier to entry.
• D) has a license granted by the government.

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Definitions:

Independent Projects

Projects that are evaluated for investment purposes, where the acceptance of one project does not affect the decision to undertake another.

IRR

A financial metric, the Internal Rate of Return, is applied to estimate the profitability prospects of potential investments.

AAR

Average Annual Return, representing the average amount of money earned by an investment each year over a given time period.

Discounted Payback

A capital budgeting method that calculates the time needed to recoup the initial investment in present value terms, considering the time value of money.