A Firm Doubles the Quantity of All Resources It Employs

question 346

Multiple Choice

A firm doubles the quantity of all resources it employs and, as a result, output doubles. Which of the following is correct?

• A)There are increasing returns to scale.
• B)The long-run average total cost curve is flat.
• C)The law of diminishing returns is proven wrong.
• D)The example is for the short-run rather than the long-run.

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Definitions:

Favorable Variance

A financial term indicating that actual costs were less or actual revenues were more than what was budgeted or forecasted.

Variable Cost

Variable costs vary directly with the level of production output, including expenses like raw materials and direct labor.

Flexible Budget

A dynamic budget that recalibrates based on fluctuations in operational volume or activity.

Output

The quantity of goods or services produced by a company during a specific period.