Economies of Scale Exist as a Firm Increases Its Size

question 296

Multiple Choice

Economies of scale exist as a firm increases its size in the long run because of all of the following except

• A)the firm can afford more sophisticated technology in production.
• B)labor and management can specialize even further in their tasks.
• C)as a larger input buyer, the firm can purchase inputs at a lower per unit cost.
• D)as a firm expands its production, its profit margin per-unit of output increases.

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Definitions:

Balance Sheet

A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time, providing insight into financial health.

Gross Profit Method

An accounting technique used to estimate inventory levels and cost of goods sold by applying a consistent gross profit percentage to sales figures.

Retail Method

An inventory accounting method used in retail, estimating the ending inventory value based on the relationship between cost and retail price.

Weighted-Average Method

An inventory costing method that calculates the cost of goods sold and ending inventory based on the average cost of all units available.