A Firm Is Operating in Its Range of Economies of Scale

question 274

Multiple Choice

A firm is operating in its range of economies of scale and is on both its LRAC curve and its short-run ATC curve. At that level of output, the slope of its LRAC curve is

• A) zero and the slope of its ATC curve is zero.
• B) zero and the slope of its ATC curve is negative.
• C) negative and the slope of its ATC curve is zero.
• D) negative and the slope of its ATC curve is negative.

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Definitions:

Direct Materials Cost

The cost of raw materials that are directly involved in the production of a product, easily traceable to the finished product.

Standard Direct Materials

The predetermined cost and quantity of raw materials expected to be used in manufacturing a product.

Standard Costs

Predetermined or budgeted costs serving as a benchmark for evaluating actual performance and cost control.

Cost Control

The practice of identifying and reducing business expenses to increase profits, involving the analysis and management of cost elements.