CFA Practice Question

There are 539 practice questions for this study session.

CFA Practice Question

A firm finds that producing 30,000 vases costs $180,000 while producing 40,000 vases costs $200,000. This pattern might be explained by ______.
A. economies of scale
B. diseconomies of scale
C. diminishing marginal productivity
Explanation: Economies of scale imply that average total cost declines as output increases in the long run. In this example, average total cost falls from $6 to $5 when production increases by 10,000 vases. This could have been caused by increasing marginal productivity if this were the short run, but that is not given as an option.

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