Other Things Being Equal, If the Fixed Costs of Setting

question 133

Multiple Choice

Other things being equal, if the fixed costs of setting up a production plant are very high, _____ can make sense.

• A)serving the world market from a single plant sited at a single, optimal location
• B) adopting a low minimum efficient scale
• C) basing production in all the individual national markets
• D) manufacturing in multiple locations

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Definitions:

Disposable Income

The amount of income left for an individual or household after paying all taxes, available for spending, saving, or investing.

Autonomous Consumption

The level of consumption that occurs when income is zero, showing the basic level of consumption necessary for survival.

Permanent Income Hypothesis

A theory suggesting that people's consumption decisions are based on their long-term income expectations rather than their current disposable income.

Negative Savings

A situation where spending exceeds income, resulting in a deficit rather than savings.