As the Volume of Production in a Firm Increases, the Average

question 38

Multiple Choice

As the volume of production in a firm increases, the average cost per unit decreases until some optimal volume of production is reached, after which the average costs of production begin to rise because of

• A) diseconomies of scale.
• B) economies of scope.
• C) diseconomies of scope.
• D) economies of scale.

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Definitions:

Bond Rating

An assessment of credit quality provided by rating agencies, indicating the default risk of a bond issuer.

Pure Play Approach

An investment strategy that focuses on companies specializing in a single line of business or product, enhancing portfolio focus but potentially increasing risk.

Cost Of Capital

The minimum rate of return a company must earn on its investments to maintain its market value and attract funds.

Risk Class

A categorization that reflects the level of risk associated with an investment, used to align investments with an investor's risk tolerance.