If Average Costs of Production Decline with Increases in Output

question 22

Multiple Choice

If average costs of production decline with increases in output for a particular firm:

• A)many small firms will be more efficient than a single large firm.
• B)one large producer will be more efficient than many small producers.
• C)product diversification is necessary to spread the overhead.
• D)diseconomies of scale become significant as output increases.
• E)the variable cost of production must exceed the fixed costs.

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Definitions:

Cash Balance

The amount of cash or cash equivalents held by a company at a particular point in time.

Selling and Administrative Expense

Costs related to the selling of products and the administration of a business, not including production costs.

Variable Expense

Expenses that change in proportion to the activity of a business.

Fixed Expense

Costs that do not vary with the level of production or sales, such as rent or salaries.