Use the Figure Below to Answer the Following Questions

question 82

Multiple Choice

Use the figure below to answer the following questions.

Figure 11.4.4
-Refer to Figure 11.4.4, which illustrates the long-run average total cost curve. Given an increase in output from Q₁ to Q₂,

• A)economies of scale exist.
• B)diseconomies of scale exist.
• C)constant returns to scale exist.
• D)average total cost is increasing.
• E)average total cost is decreasing.

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Definitions:

Variable Overhead Cost

Those expenses of operating a business that vary with the level of output or production activity, such as utilities for manufacturing equipment.

Maintenance Costs

Expenses incurred in the upkeep of machinery, buildings, and equipment to ensure efficient operation and prevent breakdowns.

Machine-Hours

A measurement unit representing the amount of work a machine can perform in one hour, often used in manufacturing to allocate costs based on machine usage.

Variable Manufacturing Overhead

Variable manufacturing overhead consists of costs that vary with the level of production, such as indirect materials and utilities that increase with more production.