When the Firm Increases Output and the Costs Rise Proportionately

question 211

Multiple Choice

When the firm increases output and the costs rise proportionately, then the long-run average cost curve is ________ and the firm is experiencing ________.

• A) horizontal; constant returns to scale
• B) downward sloping; constant returns to scale
• C) upward sloping; diseconomies of scale
• D) downward sloping; economies of scale

---

Definitions:

Freight-Absorption Pricing

A pricing strategy where the seller absorbs all or part of the freight charges to attract customers from distant locations.

Mississippi River

A major North American river that flows southward from northern Minnesota to the Gulf of Mexico, serving as a critical waterway for transportation and commerce.

FOB Factory

FOB Factory, or Free on Board Factory, is a pricing term that indicates the buyer takes responsibility for goods once they leave the seller's premises.

Neiman Marcus

is a luxury department store chain in the United States known for its high-end clothing, accessories, and home furnishings.