Consider an Industry in Which, for Each Individual Firm in the Industry

question 163

Multiple Choice

Consider an industry in which, for each individual firm in the industry, cost per unit of output declines as the individual firm's output increases. If there is an increase in the number of firms in this industry whereas the market size stays the same, then the

• A)marginal cost at each firm decreases because each firm produces more.
• B)average total cost at each firm increases because each firm produces less.
• C)marginal cost at each firm increases because each firm produces more.
• D)average total cost at each firm decreases because each firm produces more.
• E)average total cost at each firm decreases because each firm produces less.

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Definitions:

Product Cost

The total expense incurred in manufacturing a product, including direct labor, direct materials, and overhead costs.

Period Cost

A type of expense that is not directly tied to the production of inventory and is instead associated with a specific time period, such as sales and administrative expenses.

Managerial Situation

A managerial situation involves the context and conditions under which managers make decisions, handle operations, and solve problems within an organization.

Decision Making

Decision making is the process of making choices by identifying a decision, gathering information, and assessing alternative resolutions.