Costs Increase with Output in an Increasing-Cost Industry Because

question 96

Multiple Choice

Costs increase with output in an increasing-cost industry because

• A) input prices increase as the industry competes for scarce resources.
• B) firms may be forced to use less productive inputs.
• C) the firms become monopolies.
• D) Both A and B are correct.

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Definitions:

Interest Expense

The charges an organization incurs from borrowing funds for a certain time frame.

Capital Lease

A lease agreement in which the lessee essentially buys an asset and borrows the funds through the lease, recording the asset and the liability on their balance sheet.

Implicit Interest Rate

An interest rate inferred from leasing transactions or other contractual arrangements, calculated based on the present value of payments and the initial value of the leased asset.

Present Value Factors

A mathematical formula used to determine the present value of a series of future cash flows by applying a specific discount rate.