When Long-Run Average Costs Rise as Output Increases, the Firm

question 103

Multiple Choice

When long-run average costs rise as output increases, the firm is experiencing

• A) diseconomies of scale.
• B) diminishing returns.
• C) constant returns to scale.
• D) economies of scale.

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Definitions:

Call Option

A financial contract that gives the buyer the right, but not the obligation, to buy an underlying asset at a specified price within a certain period.

Firm Value

The total value of a business, determined by its assets, earnings, and potential in the market.

Call Option Price

The price at which the holder of a call option has the right, but not the obligation, to buy an underlying security before the option expires.

Option Maturity

The date on which an option contract expires, after which it can no longer be exercised.