If a Firm Decreases Its Plant Size and Finds That

question 98

Multiple Choice

If a firm decreases its plant size and finds that its long-run average costs have decreased, then

• A)its labor is more productive in a smaller plant.
• B)its diseconomies of scale are less.
• C)the firm should reduce its plant size even more.
• D)the firm is now profitable.

---

Definitions:

Cash Flows

The comprehensive flow of funds in and out of a corporation, significantly shaping its ability to pay off short-term debts.

Interest Rate

The outlay, displayed as a percentage of the principal, that a borrower pays to a lender for the privilege of using their assets.

Years

A unit of time representing a period of 365 or 366 days, used as a measure of time for financial calculations and forecasts.

Preferred Stock

A class of ownership in a corporation that has a higher claim on assets and earnings than common stock.