When a Firm's Long-Run Average Total Cost Falls as Its

question 117

Multiple Choice

When a firm's long-run average total cost falls as its output increases,the firm is experiencing

• A) economies of scale.
• B) diseconomies of scale.
• C) constant returns to scale.
• D) decreasing marginal returns.
• E) decreasing cost of marginal returns.

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Definitions:

Weighted-Average Method

An inventory costing method that calculates the cost of goods sold based on the weighted average of the costs of goods available for sale.

Mixing Department

A specific section in a manufacturing plant where materials are combined to produce a mixture or compound as part of the production process.

Conversion Costs

The combined costs of direct labor and manufacturing overhead necessary to convert raw materials into finished goods.

Weighted-Average Method

An inventory costing method that calculates the cost of goods sold and ending inventory value based on the average cost of all units available for sale during the period.