A Firm Decreases Its Scale of Operation and Discovers That

question 30

Multiple Choice

A firm decreases its scale of operation and discovers that its long-run average costs decrease.Which of the following does this indicate?

• A) Labor's marginal product has increased.
• B) Diseconomies of scale were absent in the larger plant.
• C) The firm's scale initially was so large that it experienced diseconomies of scale.
• D) The firm's scale initially was too small to experience economies of scale.
• E) Its long-run marginal cost was smaller with the larger plant than with the smaller plant.

---

Definitions:

Heuristics

These are rules-of-thumb or shortcuts that simplify decision making and problem-solving, especially in complex situations.

Specialty Shops

Retail businesses that focus on specific product categories, offering specialized selections within those categories.

Framing Effects

Psychological phenomena where the way information is presented affects decision-making or judgment.

Big Box

A large retail store, usually part of a chain, which offers a wide variety of goods and is characterized by its large physical footprint.