Constant Returns to Scale Indicate That a Firm Is Experiencing

question 159

Multiple Choice

Constant returns to scale indicate that a firm is experiencing:

• A) per unit costs of production that are decreasing as the scale of output expands.
• B) per unit costs of production that remain stable as the scale of output expands.
• C) per unit costs of production that are increasing as the scale of output expands.
• D) an increasing marginal product.

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Definitions:

Preemptive Rights

A stockholder’s right to maintain her proportionate ownership in a corporation. The stockholder has the right to buy a share of any newly issued stock that is proportionate to her fractional ownership of the company before the new issue. The right is not a matter of law but must be written into the corporation’s bylaws.

Proportionate Ownership

Ownership shares in a company or asset divided among investors in proportion to their investment.

Efficient Markets

A financial market hypothesis suggesting that asset prices fully reflect all available information, making it impossible to consistently achieve higher-than-average returns.

Informed Markets

Markets where all participants have access to all relevant information, leading to more efficient price determination.