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

question 259

Multiple Choice

Figure 12-9
The figure below depicts average total cost functions for a firm that produces automobiles.
-Refer to Figure 12-9.At levels of output less than M,the firm experiences

• A) economies of scale.
• B) diseconomies of scale.
• C) constant returns to scale.
• D) both diminishing marginal productivity and coordination problems.

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Definitions:

Fixed Cost

Costs that remain constant in total amount with changes in the volume of activity, such as rent and salaries.

Mixed Cost

Expenses that have both fixed and variable components, changing with the level of activity but also containing a static element.

Margin Of Safety

The difference between actual or projected sales and the break-even point, indicating the amount of sales that can decline before a business incurs a loss.

Fixed Costs

Fixed costs are business expenses that remain constant regardless of the level of production or sales activity, such as rent and salaries.