QUESTION 19

In 2012, then Barnes & Noble CEO William Lynch predicted that although the firm was suffering losses in selling its Nook tablet, "the Nook business will scale in fiscal 2013, reducing losses from last year."

When Lynch said that "the Nook business will scale," he meant the Nook business will

A.

increase in size gaining economy of scale advantages.

B.

decrease in size until reaching the maximum efficient scale.

C.

increase in size until reaching the maximum efficient scale.

D.

decrease in size gaining economy of scale advantages.

Part 2

As production levels increase, the Nook would become more profitable because

A.

fixed costs will fall.

B.

average cost per unit will fall.

C.

fixed costs will rise.

D.

average cost per unit will rise.