If There Are No Fixed Costs in the Long Run,how

question 36

Multiple Choice

If there are no fixed costs in the long run,how can it be said that economies of scale arise from spreading fixed costs over more units of output?

• A)Economies of scale is a short run phenomenon,and so diminishing returns is the root cause of scale economies.
• B)Costs of quasi-fixed inputs get spread over more units of output whichdrives down average cost in the long run.
• C)Average fixed costs decline continuously as output rises.
• D)Long-run average cost falls because all fixed costs are sunk.

---

Definitions:

Process Costing System

An accounting system used to calculate the cost of producing products in industries where the production process is continuous.

Process Costing System

An accounting method used where goods are produced in a continuous process, costs are averaged over all units to calculate unit costs.

Factory Overhead Costs

Indirect costs incurred during the manufacturing process, not including the costs of direct labor and materials.

Predetermined Overhead Allocation Rate

A rate used to apply manufacturing overhead to products or job orders, calculated based on estimated overhead costs and activity levels before production begins.