A Company Gets a Huge, One-Time Order

question 27

Multiple Choice

A company gets a huge, one-time order. It needs an additional 40 employees to complete the job but will not need them once the job is done. The best strategy is for the company to:

• A) not accept the new job
• B) use temporary employees
• C) hire and then layoff 40 employees
• D) bring former employees out of retirement

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Definitions:

Long Run Average Cost Curve

A graphical representation showing the minimum average cost at which any output level can be produced in the long term when all inputs, including capital, are variable.

Increasing Returns to Scale

A situation in which a proportionate increase in all inputs leads to a greater proportional increase in output, indicating improved production efficiency.

Diminishing Marginal Returns

A principle stating that if one factor of production is increased while others remain constant, the overall returns will gradually decrease after a certain point.

Long-Run Average Cost Curves

A graphical representation showing the average cost per unit of output over a long period, where all inputs, including capital, are variable.