Which of the Following Best Defines 'Incremental Earnings

question 64

Multiple Choice

Which of the following best defines 'incremental earnings'?

• A)The net present value (NPV)of earnings that a firm is expected to receive as the result of an investment decision
• B)The amount by which a firm's earnings are expected to change as the result of an investment decision
• C)Cash flows arising from a particular investment decision
• D)The earnings arising from all projects that a company plans to undertake in a fixed timespan

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Definitions:

Natural Monopoly

A situation in which a single firm can supply a product or service to an entire market more efficiently than multiple companies, often due to high fixed costs.

Economies of Scale

The cost advantage that arises with increased output of a product, leading to a fall in the per-unit production cost.

Average Total Cost

The total cost of production divided by the number of units produced, essentially representing the per-unit production cost.

Marginal Cost

The financial outlay involved in the manufacture of one more unit of a product or service.