In the Long Run a Company That Produces and Sells

question 364

Multiple Choice

In the long run a company that produces and sells dog beds incurs total costs of $1,200 when output is 30 beds and $1,600 when output is 40 beds. Firm A exhibits

• A)diseconomies of scale because total cost is rising as output rises.
• B)constant returns to scale because average total cost is constant as output rises.
• C)diseconomies of scale because average total cost is rising as output rises.
• D)economies of scale because average total cost is falling as output rises.

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Definitions:

Lumber Mill

A facility where logs are cut into timber, undergoing processes from debarking to sawing and sometimes further processing.

Board Feet

A volume measurement used in the lumber industry, equivalent to a piece of wood that is one foot long, one foot wide, and one inch thick.

Responsibility Accounting System

An accounting system that measures the results of each responsibility center and relates them to managers responsible for those centers.

Controllable Costs

Expenses that can be modified or managed by a decision-maker within an organization, including costs like supplies and advertising.