For a Constant-Returns-To-Scale Production Function

question 8

Multiple Choice

For a constant-returns-to-scale production function,

• A)marginal costs are constant but the average cost curve has a U-shape.
• B)both average and marginal costs are constant.
• C)marginal cost has a U-shape; average costs are constant.
• D)both average and marginal cost curves are U-shaped.

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Definitions:

Planned Variable Costs

The forecasted variable expenses that change in proportion to the activity of a business.

Budgeted Activity Level

An estimate of the amount of production, sales, or other activity for a particular period, used for budgeting and planning processes.

Static Budget

A fixed budget that does not change or adjust in response to variations in business activity levels throughout the budget period.

Variable Overhead Costs

Expenses related to the indirect costs of production that vary with the level of output.