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

Question

Quizplus · Accepted Answer

When an organization's capacity is on the portion of the average unit cost curve that falls as output rises, it indicates that the organization is experiencing economies of scale. This means that as the organization produces more, the average cost per unit decreases. This situation suggests that the organization's facility is below its optimum operating level, implying that expanding or building a larger facility could lead to further efficiencies and cost savings.

An Organization Whose Capacity Is on That Portion of the Average