Which one of the following statements is correct? Answer Firms with large net op

Question

Which one of the following statements is correct?
Answer
Firms with large net operating losses tend to be acquiring firms rather than target firms.
The leverage associated with an acquisition increases the tax liability of the acquiring firm.
If either an increase or a decrease in the level of production causes the average cost per unit to increase then the firm is currently operating at its optimal production level.
Firms can always benefit from economies of scale if they increase the size of their firm through acquisitions.
If a firm uses it surplus cash to acquire another firm then the shareholders of the acquiring firm immediately incur a tax liability related to the transaction.

Explanation / Answer

If either an increase or a decrease in the level of production causes the average cost per unit to increase then the firm is currently operating at its optimal production level.

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