It Is Usually Most Economical to Ship Bulky Nonperishable Items

question 17

Multiple Choice

It is usually most economical to ship bulky nonperishable items, such as coal and iron ore, by

• A) water.
• B) pipeline.
• C) truck.
• D) air.
• E) None of the above is a good answer, since the cost of shipping a product usually does not vary from one mode to another.

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Definitions:

Decreasing-Cost Industry

An industry in which the average cost of production decreases as the industry grows and output increases.

Decreasing Returns to Scale

A situation in which a proportional increase in all inputs leads to a less than proportional increase in output, indicating reduced efficiency as scale of production expands.

Long-Run Equilibrium

A state in which all factors of production and inputs can be adjusted by firms, leading to a situation where no firm has an incentive to change its output or production method.

LRAC Curve

Long-Run Average Cost Curve, a graphical representation showing the minimum cost at which any output level can be produced in the long run.