Economies of Scale Exist When

question 32

Multiple Choice

Economies of scale exist when

• A)fixed cost decreases as output increases.
• B)long-run average cost decreases as output increases.
• C)long-run marginal cost is less than long-run average cost.
• D)both a and b
• E)both b and c

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Definitions:

Capital Budgeting

The process a business undergoes to evaluate potential major projects or investments, analyzing the expected cash flows to determine whether they meet a set investment criteria.

Capital Structure

The composition of a company's funding through a mix of debt, equity, and other financing sources to finance its operations and growth.

WACC

Weighted Average Cost of Capital, a calculation of a firm's cost of capital in which each category of capital is proportionately weighted.

Flotation Costs

The expenses incurred by a company in issuing new securities, including underwriting fees, legal fees, and registration fees.