The Short-Run Average Total Cost Curve Eventually Turns Upward to Form

question 17

Multiple Choice

The short-run average total cost curve eventually turns upward to form a U shape because:

• A) of diminishing marginal cost.
• B) of increasing average fixed cost.
• C) all factors can be varied in the long run.
• D) of diminishing marginal productivity.

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Definitions:

Plowback Ratio

Also known as the retention rate, it refers to the portion of earnings that a company retains and reinvests in its operations rather than distributing as dividends.

Optimistic Assumptions

Assumptions made under the most favorable conditions, often used in forecasting or planning to predict the best-case scenario outcomes.

Pro Forma

A method of calculating financial results using hypothetical income and expenses, often used for planning or projective statements.

Financial Planning

The process of framing objectives, policies, procedures, budgets, and financial forecasts for a specific time frame.