Which of the Following Is a Consequence of a Low

question 14

Multiple Choice

Which of the following is a consequence of a low minimum efficient scale?

• A)Preventing a firm from utilizing capital equipment fully
• B)Necessitating centralized production in a single location or a limited number of locations
• C)Preventing a firm from accommodating demands for local responsiveness
• D)Increasing the unit cost of products
• E)Allowing a firm to hedge against currency risk by manufacturing the same product in several locations

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Definitions:

Contribution Margin

The amount by which a product's selling price exceeds its total variable costs, indicating how much contributes to covering fixed costs and generating profit.

Pretax Income

Earnings of a company before any tax is applied, calculated by deducting all operating expenses, including cost of goods sold and interest, from revenues.

Curvilinear Costs

Costs that change with the level of output but at a non-constant rate, displaying a curved relationship between cost and output.

Nonconstant Rate

Refers to a rate that changes over time, as opposed to a constant or fixed rate which remains the same.