Economies of Scale Refers to When

question 5

Multiple Choice

Economies of scale refers to when:

• A) an increase in the quantity of output decreases average total cost in the long run.
• B) an increase in the quantity of output increases average total cost in the long run.
• C) average total cost does not depend on the quantity of output in the long run.
• D) None of these is true.

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Definitions:

Plant Assets

Tangible assets used in the operation and production areas of a manufacturing company that have a useful life longer than one year.

Disposed

This refers to the act of getting rid of something, often used in the context of assets that have been sold or removed from the books.

Discarding

The process of getting rid of something no longer useful or required, often in the context of inventory or asset management.

Revenue Expenditures

Costs that are expensed in the current period and not capitalized; they are for maintaining the earning capacity of existing assets rather than for new assets.