Figure 12-9 the Figure Below Depicts Average Total Cost Functions for a for a Firm

question 509

Multiple Choice

Figure 12-9
The figure below depicts average total cost functions for a firm that produces automobiles.
-Refer to Figure 12-9.The firm experiences economies of scale at which output levels?

• A) output levels less than M
• B) output levels between M and N
• C) output levels greater than N
• D) All of the above are correct as long as the firm is operating in the long run.

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Definitions:

Conversion Costs

The combined costs of direct labor and manufacturing overhead involved in transforming materials into finished products.

Prime Costs

The combined costs of direct material and direct labor required to produce a good.

Conversion Costs

Costs incurred to convert raw materials into finished goods, including direct labor and manufacturing overhead.

Prime Costs

The combination of direct materials and direct labor costs that are directly attributable to the production of goods.