While Firms Buy Many of Their Inputs Through the Open

question 14

Multiple Choice

While firms buy many of their inputs through the open market, there is often a desire to produce critical inputs. A common concern in producing an input yourself (internally) is that:

• A) the firm will find it too easy to manage quality.
• B) the firm will not minimize costs at a high enough level of output.
• C) outside competitors will learn about your inputs.
• D) your firm will get prompt supply of the input.

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Definitions:

Average Cost Curve

A graphical depiction showing the cost per unit of output at different levels of production, reflecting the variability in total cost over volume.

Positive Profit

A financial gain that occurs when the revenues received from business activities exceed the expenses, costs, and taxes needed to sustain the activity.

Scale of Operation

The size at which a company or factory operates, often impacting its production efficiency and costs.

Long Run

pertains to a time period in economics during which all factors of production and costs are variable, allowing for full adjustment to any change.