When a Firm Is Operating at an Efficient Scale

question 601

Multiple Choice

When a firm is operating at an efficient scale,

• A)average variable cost is minimized.
• B)average fixed cost is minimized.
• C)average total cost is minimized.
• D)marginal cost is minimized.

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Definitions:

Direct Labor-Hours

A measure of the time workers spend directly manufacturing a product, used in calculating labor costs and efficiency.

Variable Overhead

Costs of indirect production activities that fluctuate with the level of production output, such as electricity for machinery or materials handling costs.

Direct Materials

Direct materials are raw materials that are directly used in the manufacturing process of a product and can be easily traced to the product itself.

Direct Labor-Hours

A measure of the total amount of time worked by employees directly involved in manufacturing a product or delivering a service.