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:

Retained Earnings

The portion of a business's profits not distributed to shareholders, instead being reinvested in the business or used to pay off debt.

Net Income

The total amount of profit earned by a company after all expenses and taxes have been deducted from total revenue.

Cash Dividends

Profits distributed by a company to its shareholders out of the company's current or retained earnings, typically in the form of cash.

Preferred Stock

A class of ownership in a corporation with a specified dividend that is paid before any dividends are paid to common stock holders and typically with no voting rights.