If a Firm Decreases Its Plant Size and Finds That

question 98

Multiple Choice

If a firm decreases its plant size and finds that its long-run average costs have decreased, then

• A)its labor is more productive in a smaller plant.
• B)its diseconomies of scale are less.
• C)the firm should reduce its plant size even more.
• D)the firm is now profitable.

Understand the distinction between positive and normative statements within economic discourse.

Recognize the scope of microeconomics in studying the behavior of individual economic units like consumers and firms.

Understand the basics of market structures and the conditions for perfect competition.

Comprehend the significance of market extent and product substitutability in competition.

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Definitions:

Initial Outlay

The initial investment amount required to start a project or purchase an asset.

Future Cash Inflows

Expected incoming funds or earnings generated from investments, operations, or financial activities in the future.

Discount Rate

The discount rate that's used to estimate the present value of future cash flows within discounted cash flow analysis.

Net Present Value

Net Present Value (NPV) is a financial metric used to evaluate the profitability of an investment, calculated by summing the present values of incoming and outgoing cash flows over a period of time.