As Any Firm with Decreasing Returns to Scale Increases Its

question 15

Multiple Choice

As any firm with decreasing returns to scale increases its output:

• A) its average cost of production must rise.
• B) its average cost of production must fall.
• C) its total cost of production must fall.
• D) its marginal cost of production must rise.

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Definitions:

Residual Income

The income that remains after deducting all required costs of capital from the operating income, used as a performance measure.

Minimum Required Rate

is the lowest return or yield that an investor is willing to accept on an investment, considering the risk involved.

Average Operating Assets

This term refers to the average value of the assets used in the operations of a business over a specific period, usually calculated to assess performance.

Residual Income

Profit remaining after all costs and expenses, including capital costs, have been deducted. It's often used to assess the profitability of a department or investment.