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

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Definitions:

Job-Order Costing System

An accounting system that tracks costs individually for each job, suitable for companies producing unique products or services.

Activity-Based Costing

A costing technique that determines the cost of a product based on the activities involved in its production and the extent to which the product uses those activities.

Manufacturing Overhead

Costs related to the production process that are not directly tied to the product, such as rent for the manufacturing space, utility costs, and salaries for manufacturing management.

Traditional Costing System

A costing method that assigns manufacturing overhead costs to products based on volume metrics such as machine hours or labour hours.