In the Long Run a Company That Produces and Sells

question 442

Multiple Choice

In the long run a company that produces and sells laundry detergent incurs total costs of $2,500 when output is 1,250 units and $2,750 when output is 1,500 units. For this range of output, the laundry detergent company exhibits

• A)economies of scale.
• B)constant returns to scale.
• C)diseconomies of scale.
• D)efficient scale.

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Definitions:

Dollar Sales

The total value of sales within a specific period, measured in monetary terms.

Unit Sales

The number of individual units of a product sold in a specific time period.

Contribution Margin Ratio

The ratio of Contribution Margin (sales minus variable costs) to sales revenue.

Target Profit

The specific amount of net income that a company aims to achieve within a certain time frame.