Increasing Returns to Scale Occur When a Firm's

question 134

Multiple Choice

Increasing returns to scale occur when a firm's:

• A) average costs of production increase as its output increases.
• B) average costs of production decrease as its output increases.
• C) average fixed costs increase as its output increases.
• D) marginal costs increase as its output increases.

---

Definitions:

Total Revenues

The total amount of money received by a company from its sales of goods or services before any expenses are subtracted.

Variable Costs

Costs that vary directly with the level of production or sales, like raw materials and labor.

Economic Profit

The financial gain that exceeds both the total opportunity costs of production and the accounting costs, reflecting the additional value created from business activities.

Accounting Profit

The profit a company has after deducting all its expenses from its total revenue.