If a Firm Increases Its Output Level by 50 Percent

question 58

Multiple Choice

If a firm increases its output level by 50 percent and,as a result,long-run total cost rises by 40 percent,the firm is experiencing

• A)diseconomies of scale
• B)constant returns to scale
• C)economies of scale
• D)increasing marginal returns
• E)diminishing marginal returns

---

Definitions:

Equipment

Tangible property used in the operation of a business that is not intended for sale in the ordinary course of business.

Acquisition Differential

The disparity between the acquisition cost and the fair market value of the identifiable net assets obtained.

Cumulative Preferred Shares

Type of preferred stocks where dividends accumulate if not paid in a given year, and must be paid out before common stock dividends can resume.

Surplus (Deficit)

The financial position that results when total revenues exceed (surplus) or are less than (deficit) total expenses.