Economies of Scale Exist

question 10

Multiple Choice

Economies of scale exist

• A) only for monopolists.
• B) when long-run average total costs increase.
• C) when long-run average total costs decrease.
• D) when long-run average total costs are constant.
• E) when governments create barriers to entry.

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Definitions:

Direct Labor

Direct labor involves the work of employees that is directly attributable to the production of goods or provision of services, such as manufacturing labor costs.

Materials Price Variance

The deviation between the actual cost of direct materials and the standard cost, multiplied by the quantity purchased.

Variable Overhead Rate

The rate at which variable overhead costs are allocated to a unit of production, often based on direct labor hours or machine hours.

Fixed Overhead Budget

A financial plan that projects the expected fixed costs required to support the operations of a business.