When It Is Cheaper for One Firm to Produce a Number

question 61

Multiple Choice

When it is cheaper for one firm to produce a number of different commodities together than it is for a group of small firms to produce those commodities, ____ exist(s) .

• A)economies of scale
• B)economies of scope
• C)diminishing marginal returns
• D)marginal cost pricing

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Definitions:

Fixed Expenses

Costs that do not fluctuate with the level of production or sales within a certain range, such as rent or salaries.

Absorption Costing

A costing technique that encompasses the total expenses of production, including direct materials, labor, and all overhead costs, both variable and fixed, in a product's cost.

Single Product

A business or manufacturing approach where only one type of product is produced rather than multiple products.

Absorption Costing

An accounting method that includes all direct costs and overhead in the cost of a product.