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:

Retail Business

A business entity that sells goods or services directly to consumers.

Service Business

A business that provides intangible products or services to customers.

Gross Profit

The difference between sales and the cost of goods sold, representing the profit from buying and selling goods before other expenses are taken out.

Cost of Merchandise Sold

The total expense incurred by a company to buy or manufacture the goods sold during a period.