What Is Not True If a Firm Exhibits Decreasing Average

question 74

Multiple Choice

What is not true if a firm exhibits decreasing average cost as quantity increases?

• A)Marginal cost must be below average cost.
• B)Firms would go bankrupt if all prices were equal to marginal cost.
• C)More customers can be served at lower average costs per unit.
• D)This is called diseconomies of scale.

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Definitions:

Conversion Costs

Conversion costs are the combined costs of labor and overhead expenses required to convert raw materials into finished products.

Equivalent Units

Measures used in manufacturing to express the amount of work completed in terms of fully finished units during a given period.

First-in

This typically refers to the inventory valuation method "First-In, First-Out" (FIFO), which assumes the first items produced or purchased are the first ones sold.

Conversion Costs

Costs incurred during the transformation of raw materials into finished goods, typically including labor and overhead.