If Constant Returns to Scale Apply to the Entire Range

question 50

Multiple Choice

If constant returns to scale apply to the entire range of production,then the long-run total cost curve would most likely:

• A)be a straight line from the origin.
• B)to increase at a decreasing rate initially,and then increase at an increasing rate.
• C)to increase at an increasing rate initially,and then increase at a decreasing rate.
• D)be U-shaped.

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Definitions:

Fixed Manufacturing Overhead

Costs that do not vary with the level of production or sales, such as salaries of managers, depreciation of manufacturing equipment, and rent of the factory building.

Deferred in Inventories

A situation where costs incurred in acquiring or producing inventory are postponed from being recognized as expenses until the goods are sold.

Released from Inventories

The process of moving goods from inventory to be used in production or to be sold, thereby reducing the inventory account.

Unit Product Cost

The total cost (both direct and indirect) to produce a single unit of a product.