A Cost Function Has Economies of Scale If

question 32

Multiple Choice

A cost function has economies of scale if

• A)average fixed costs fall as production increases.
• B)total costs fall as production increases.
• C)the average total cost falls as production increases.
• D)it is less expensive to produce goods jointly rather than separately.

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Definitions:

Capacity Utilization

A measure of how effectively an entity uses its production capacity to produce goods, expressed as a percentage of total potential output.

Cyclical Industry

An industry highly sensitive to the economic cycle, experiencing rapid growth in booming economies and significant declines during recessions.

Automobile Industry

The automobile industry encompasses the wide range of companies and activities involved in the design, manufacturing, marketing, and selling of motor vehicles.

Tobacco Industry

Comprises companies and entities that manufacture, market, and distribute tobacco and tobacco-related products.