Figure 7-11   Figure 7-11 Shows an Average Cost Curve with Points on Curve

question 123

Multiple Choice

Figure 7-11  

Figure 7-11 shows an average cost curve with points on it that correspond to three quantity levels. Which of the following statements must be wrong?

• A)The firm's technology may show increasing marginal returns as production increases from A to B.
• B)The firm may have positive fixed costs.
• C)As production expands from A to B to C, the firm may become increasingly difficult to manage efficiently.
• D)The firm's average fixed cost may rise as production increases from B to C.

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Definitions:

Defective Items

Products that fail to meet quality standards or specifications, often resulting in returns or waste.

AOQ

Average Outgoing Quality, a measure in quality control that represents the average quality level of products leaving the manufacturing process.

Type I Error

Statistically, the probability of rejecting a good lot.

Good Lot

A term used in quality control to describe a batch of products that meet specified quality standards.