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.

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Definitions:

Net Operating Income

A measure of a company's profitability that calculates how much revenue exceeds operating expenses, not including taxes and interest expenses.

Average Operating Assets

A financial metric calculated by averaging the beginning and ending values of assets employed in generating operating income over a certain period.

Minimum Required Rate

The lowest rate of return considered acceptable by investors for investing in a financial instrument, based on risk and alternative opportunities.

Average Operating Assets

An average value of the assets used in the regular operations of a business over a specific period.