Economies of Scale Exist Whenever Long-Run Average Costs

question 1

Multiple Choice

Economies of scale exist whenever long-run average costs:

• A) Increase as output is increased
• B) Remain constant as output is increased
• C) Decrease as output is increased
• D) Decline and then rise as output is increased
• E) None of the above

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Definitions:

Liability

An obligation arising from past transactions or events, which may result in an outflow of resources embodying economic benefits.

Provision

An amount set aside in the accounts to cover a probable future expense or liability, recognized for known obligations of uncertain timing or amount.

Onerous Contract

A contract where the unavoidable costs of meeting the obligations exceed the economic benefits expected to be received from it.

Unavoidable Costs

Costs that cannot be eliminated, reduced, or postponed, and must be incurred regardless of specific business decisions or changes in operations.