As the Firm in the Above Diagram Expands from Plant

question 144

Multiple Choice

As the firm in the above diagram expands from plant size #1 to plant size #3,it experiences:

• A) diminishing returns.
• B) economies of scale.
• C) diseconomies of scale.
• D) constant costs.

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Definitions:

Market Price

The current trading rate for services or assets in the market.

Subscription Price

The price at which existing shareholders can purchase additional shares of stock before it is offered to the public.

Subscription Price

The price at which existing shareholders are allowed to buy additional shares in a rights issue, usually at a discount to the current market price.

Common Share Price

The market value of a single share of a company's common stock, fluctuating based on buying and selling activities.