Which of the Following Is True Regarding a Long-Run Industry

question 159

Multiple Choice

Which of the following is true regarding a long-run industry supply curve that is upward sloping?

• A) Average costs of production are unchanged when industry output increases.
• B) Average costs of production increase when industry output is increased.
• C) Average cost of production decrease when industry output is increased.
• D) All of the above could be true depending on the market situation.

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Definitions:

Residual Value

The estimated value that an asset will realize upon its sale at the end of its useful life.

Capital Lease

A lease agreement that qualifies as a purchase of an asset for accounting purposes, because it substantially transfers all the benefits and risks of ownership to the lessee.

Incremental Borrowing Rate

The interest rate a lessee would have to pay to borrow, over a similar term and with a similar security, the funds needed to obtain an asset lease.

Leased Equipment

Assets obtained by a company through a leasing agreement, allowing the company to use the equipment without owning it.