Asked by Travis Williams on Jul 23, 2024
Verified
An organization whose capacity is on that portion of the average unit cost curve that falls as output rises
A) has a facility that is below optimum operating level and should build a larger facility.
B) has a facility that is above optimum operating level and should build a smaller facility.
C) is suffering from diseconomies of scale.
D) has utilization higher than efficiency.
E) has efficiency higher than utilization.
Average Unit Cost Curve
A graphical representation showing how the cost per unit of producing a good changes with variations in the volume of its production.
Optimum Operating Level
The level of operation at which a company or system achieves its best performance in terms of efficiency and cost-effectiveness.
Diseconomies Of Scale
Diseconomies of Scale arise when a company or business grows so large that the costs per unit increase, leading to inefficiency and increased production costs.
- Understand the association between how capacity is utilized and the effectiveness of the process.
Verified Answer
DH
Dhonniie HollowayJul 28, 2024
Final Answer :
A
Explanation :
An organization that operates at a portion of the average unit cost curve that falls as output rises is experiencing economies of scale. This means that the organization is able to produce more output at a lower cost per unit as it increases its production levels. This suggests that the organization's facility is below its optimum operating level, and it should consider building a larger facility to take advantage of the economies of scale. Therefore, option A is the correct answer.
Learning Objectives
- Understand the association between how capacity is utilized and the effectiveness of the process.