In the Long Run a Company That Produces and Sells

question 470

Multiple Choice

In the long run a company that produces and sells organic tofu incurs total costs of $1,200 when output is 1,200 units and $1,650 when output is 1,400 units. The tofu company exhibits

• A)diseconomies of scale because total cost is rising as output rises.
• B)diseconomies of scale because average total cost is rising as output rises.
• C)economies of scale because 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:

Liquidated Damages

A provision in a contract that specifies a predetermined amount of money that must be paid as damages in the event of a breach by one of the parties.

Nominal Damages

Nominal Damages are a small sum awarded by a court when a legal wrong has occurred, but no significant actual loss was suffered by the plaintiff.

Compensatory Damages

Payments awarded to a plaintiff to compensate for harm, loss, or injury suffered due to another's wrongful act.

Liquidated Damages

A predetermined amount of money that must be paid as compensation for failure to fulfill a contract, serving as a penalty or deterrent against breach.