If a Firm Builds a Larger Plant and Constant Returns

question 100

Multiple Choice

If a firm builds a larger plant and constant returns to scale apply,which of the following statements is correct?

• A)The capacity output of the larger plant has a lower average cost.
• B)The capacity output of the larger plant has the same average cost.
• C)Economies of scale are present.
• D)LRAC will decrease as output increases.

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Definitions:

Income Tax Rate

The percentage at which an individual or corporation is taxed on their income.

Accrual-Based Net Income

The measure of a company's financial performance that includes both cash and non-cash items, recognizing revenues when they are earned and expenses when they are incurred.

Operating Income

Income generated from the regular business operations of a company, excluding items such as investment income, interest expense, and other non-operational income or expenses.

Intra-Entity Transfers

Refers to the transfer of goods, services, or resources between units within the same entity.