Consider a Cost Curve with Production Volume on the Horizontal

question 55

Multiple Choice

Consider a cost curve with production volume on the horizontal axis and marginal costs on the vertical axis. What shape would the marginal cost curve most resemble in a high-tech industry?

• A) Upward at a 45-degree angle
• B) U-shape
• C) Straight and vertical
• D) J-shape
• E) Straight and flat

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Definitions:

Salvage Value

The projected remaining worth of an asset upon reaching the end of its serviceable life.

Straight-Line Depreciation

A formula for distributing the cost of a tangible asset over its period of usability in consistent annual sums.

Production Line

A sequence of operations that assembles or manufactures products in a factory.

Expansion Option

An option within a project that allows for expansion, scaling up production or operations, if the initial phase is successful, often evaluated in capital budgeting.