Figure 711 Figure 7

question 135

Multiple Choice

Figure 7.11 Figure 7.11 illustrates the long-run average cost curve for a firm that produces picture frames.The graph also includes short-run average cost curves for three firm sizes: ATC_a, ATC_b and ATC_c.
-Refer to Figure 7.11.In the short run, if the firm sells fewer than 5000 picture frames per month,

• A)it should produce with the scale of operation associated with ATC_a.
• B)it should produce with the scale of operation associated with ATC_b.
• C)it should produce with the scale of operation associated with ATC_c.
• D)it will experience constant returns to scale.

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Definitions:

Market Price

The up-to-the-minute market price for assets or services open for buy or sell transactions.

Dividends

Funds distributed by a company to its shareholders from its profits.

Modest Dividend

A relatively small or conservative amount paid out to shareholders from a company's earnings.

Implied Constant Growth

A concept in financial modeling that assumes a company or economy will continue to grow at a consistent rate indefinitely, impacting valuation methods.