If the Economies of Scale Are Large Enough, Average Cost

question 91

Multiple Choice

If the economies of scale are large enough, average cost for a natural monopoly can be:

• A) higher than the average cost under competition.
• B) lower than the average cost under competition.
• C) higher than the price of the natural monopoly.
• D) higher than the price under competition.

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Definitions:

Production Budget

A plan that outlines the expected production in units, considering sales forecasts and inventory requirements.

Direct Labor-Hours

The total hours worked directly on the production of goods or the provision of services.

Direct Labor Rate

The cost per hour for direct labor incurred in the production of goods.

Production Budget

An estimation of the total cost and resources needed for a company to produce a set amount of goods in a given period.