If There Are Significant Economies of Scale in an Industry

question 352

Multiple Choice

If there are significant economies of scale in an industry, then

• A)a firm that is large may be able to produce at a lower unit cost than can a small firm.
• B)a firm that is large will have to charge a higher price than will a small firm.
• C)entry to that industry will be easy.
• D)firms must differentiate their products to earn economic profits.

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Definitions:

Taxable Amounts

The portions of income, estate, or transactions subject to tax, according to applicable tax laws.

Deferred Tax Liabilities

Future tax payments resulting from temporary differences between the book value and the tax basis of assets and liabilities.

Deferred Tax Assets

Future tax benefits arising from temporary differences between the tax and accounting recognition of revenue and expenses.