When a fiRm Experiences Decreasing Returns to Scale, _____

question 56

Multiple Choice

When a firm experiences decreasing returns to scale, _____.

• A) its long-run average cost curve rises as output expands
• B) it should expand its scale of operations to increase production efficiency
• C) an increase in all inputs will increase output proportionately
• D) it is on the downward-sloping portion of the long-run average total cost curve

Apply the high-low method to estimate variable and fixed costs.

Understand the concept and calculation of the margin of safety.

Evaluate the effects of changes in sales, costs, and prices on a company's break-even point and profitability.

Apply the concept of operating leverage and its impact on a company's financial risk.

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Definitions:

Social Impressions

The process by which individuals form an opinion or judgment about others within a social context.

Actor-Observer Effect

A psychological bias where individuals attribute their own actions to situational factors while attributing others’ actions to their personalities.

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Electronic devices used for recording and playback of sound on magnetic tape.

Implicit Association Test

A psychological test designed to detect the strength of a person's subconscious association between mental concepts (e.g., black or white with good or bad).