An organization whose capacity is on the portion of the average unit cost curve that increases 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 reduce facility size.
C) is enjoying economies of scale.
D) has utilization higher than efficiency.
E) has a facility that is at optimum operating level.

Question

Quizplus · Accepted Answer

An organization whose capacity is on the portion of the average unit cost curve that increases as output rises indicates that the facility is above the optimum operating level. This means that the organization should reduce facility size to achieve economies of scale and decrease costs.

An Organization Whose Capacity Is on the Portion of the Average