A Firm Is Producing 10,000 Units of Output at a Total

question 151

Multiple Choice

A firm is producing 10,000 units of output at a total cost of $5,000. If the firm increases output by 5,000 units and its total costs rise by $2,000, the firm has:

• A) economies of scale.
• B) economies of scope.
• C) constant returns to scale.
• D) diseconomies of scale.

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Definitions:

Cost Center

A department or segment of a business to which costs can be allocated but does not directly generate revenue.

Profit Center

A segment or department within an organization that is directly responsible for generating profit, measured by its performance.

Selling Division

A segment of a company focused on the sales and distribution of products or services.

Opportunity Cost

The value of the best alternative that is forgone when a particular decision is made, representing the benefits that could have been received from that alternative.