A Firm Finds That It Can Produce Several Different Goods

question 279

Multiple Choice

A firm finds that it can produce several different goods at a lower average cost by using some of the same production facilities than it could if it produced each of the goods with separate production facilities. This firm is

• A) gaining economies of scope.
• B) gaining economies of team production.
• C) gaining economies of scale.
• D) incurring diseconomies of scale.

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Definitions:

Call Option

A financial contract granting the buyer the right to buy an asset at a specified price before a set date.

Exercise Price

The cost at which the person holding the option has the right to purchase (in the case of a call option) or sell (in the case of a put option) the underlying asset.

Underlying Stock

This refers to the stock on which derivative contracts, such as options and futures, are based.

American Call

A type of call option that can be exercised at any time before its expiration date.