In Some Industries Where Firms Experience Declining Average Total Costs

question 169

Multiple Choice

In some industries where firms experience declining average total costs over the full range of output that consumers are willing to buy,

• A) a smaller firm will always have lower per-unit costs.
• B) many firms will tend to emerge from the competitive process.
• C) a single large firm will develop, and it will have cost advantages that protect it from potential rivals.
• D) a single large firm will develop, and it will buy out any smaller rival firms to avoid the small firms' production at a lower per-unit cost.

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Definitions:

Returns to Shareholders

The gains earned by shareholders on their investments in a corporation, typically in the form of dividends and stock price appreciation.

WACC

Stands for Weighted Average Cost of Capital; it represents the average rate of return a company is expected to pay its security holders to finance its assets.

Business Risks

The exposure a company or organization faces from factors that may affect its ability to achieve its objectives or financial goals.

Financial Risks

The risk of experiencing financial loss from an investment or entrepreneurial activity.