Refer to the Provided Graphs

question 154

Multiple Choice

Refer to the provided graphs. They show the long-run average total cost (LRATC) for cars. Just after World War II, the Ford Motor Company opened a large automobile manufacturing facility near Detroit with capacity Q ₀ autos per year. Shortly thereafter, the plant was closed and two smaller ones were opened in the same vicinity, each more profitably producing about one-half as many cars as the old facility. Which graph best shows the situation just described, when only one plant was operating?

• A)graph A
• B)graph B
• C)graph C
• D)graph D

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Definitions:

Units-of-production

A method of depreciation that assigns an asset's cost based on its usage, activities, or output, instead of the passage of time.

Depreciation Expense

Depreciation Expense denotes the allocation of an asset's cost over its useful life, reflecting the asset's consumption or decline in value.

Straight-line

A method of depreciation that allocates an equal expense amount to each period over the useful life of an asset.

Straight-line Depreciation

A method of allocating the cost of a tangible asset over its useful life, evenly distributing the depreciation expense each year.