If the Long-Run Average Cost Curve Is U-Shaped, the Optimal

question 120

Multiple Choice

If the long-run average cost curve is U-shaped, the optimal scale of production from society's viewpoint is

• A)the minimum efficient scale.
• B)where maximum economic profit is earned by producers.
• C)where firm profit is large enough to finance research and development.
• D)one which guarantees economic profit.

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Definitions:

Internal Rate of Return Method

A capital budgeting technique used to evaluate and compare the profitability of investments, calculating the interest rate at which the net present value of costs equals the net present value of benefits.

Capital Rationing

The process of selecting the most profitable projects to invest in when a company has a limited amount of capital.

Capital Outlay

Expenditures for acquiring fixed assets or adding to the value of an existing fixed asset with a useful life extending beyond the taxable year.

Cash Inflows

The total amount of money coming into a company from its operational, investing, and financial activities over a period.