Suppose That in 2010 ABC Corp

question 208

Multiple Choice

Suppose that in 2010 ABC Corp. produced 500 million units of a good at an average cost of $2, and in 2011 ABC Corp. expanded its plant capacity and produced 600 million units at an average cost of $1.80. In this range, one can conclude that ABC Corp. is experiencing:

• A)economies of scale.
• B)diseconomies of scale.
• C)neither economies of scale or diseconomies of scale.
• D)diminishing marginal product.

Grasp the concept of basing estimated costs on ideal vs. normal levels of performance.

Understand the application of yield pricing in differential analysis.

Recognize the implications of demand exceeding production capacity (bottleneck issues).

Calculate and interpret differential cost and revenue for decision making.