Economies of Scale Can

question 247

Multiple Choice

Economies of scale can

• A) result in an increasing cost industry.
• B) cause input prices to drop.
• C) prevent the entry of new firms into a market.
• D) reduce the rate of return which the firm may earn.

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Definitions:

External Financing

Funds raised from outside the company, typically through borrowing, issuing equity, or receiving grants, as opposed to internal funds generated from operations.

Full Capacity

The maximum level of output that a company can sustain over a period of time without increasing costs.

Total Assets

The sum of all assets owned by an entity, including both current and non-current assets.

Sustainable Growth Rate

The maximum rate at which a company can grow its earnings without needing to issue new equity or take on additional debt.