A Firm Experiences ________ When Its ________ as Output Increases

question 47

Multiple Choice

A firm experiences ________ when its ________ as output increases.

• A)economies of scale;long-run average cost curve slopes downward
• B)diseconomies of scale;average total cost curve slopes downward
• C)economies of scale;long-run average cost curve shifts upward
• D)diminishing marginal returns;average total cost curve shifts upward
• E)constant returns to scale;long-run average cost curve shifts upward

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Definitions:

Variable Costing

A pricing strategy that incorporates solely the variable costs associated with production—such as direct materials, direct labor, and variable manufacturing overhead—into the cost of goods sold, while omitting fixed overhead expenses.

Absorption Costing

A method of accounting that incorporates all costs associated with manufacturing, including direct materials, direct labor, as well as both variable and fixed overhead expenses, into the product's cost.

Variable Costing

A costing method that includes only variable manufacturing costs—direct labor, direct materials, and variable manufacturing overhead—in unit product cost.

Net Incomes

The total earnings of a company after all expenses, taxes, and costs have been deducted from total revenue.