A If $e_{c}>1$ , Increasing Returns to Scale and Decreasing Average Costs Are

question 11

Short Answer

A. If $e_{c}>1$ , increasing returns to scale and decreasing average costs are inchcated.
B. Average cost exceeds marginal cost at the minimum efficient scale of plant.
C. When total fixed cost and price are held constant, a rechiction in average variable cost will typically cause a reduction in the breakeven activity level.
D. Anincrease in total fixed cost will alwaysincrease the degree of operatingleverage for firms maling a positive net profit.
E. When longrun average cost is decreasing it can pay to operate smaller plants at their peak efficiency rather than larger plants with some excess capacity.

---

Definitions:

Translation Exposure

Financial risk associated with the translation of foreign currency financial statements into a single reporting currency.

Exchange Rate Risk

The potential loss to a company's finances or operations due to changes in the exchange rate between currencies.

Financial Statement

Formal records of the financial activities of a business, person, or other entity, presenting the financial performance and position at a specific point in time.

Forward Market

A type of financial market where parties enter contracts to buy or sell assets at a specified price with delivery and payment occurring at a future date.