A firm is producing 10,000 units of output at a total cost of $5,000. If the firm increases output by 5,000 units and its total costs rise by $2,000, the firm has:
A) economies of scale.
B) economies of scope.
C) constant returns to scale.
D) diseconomies of scale.

Question

Quizplus · Accepted Answer

Economies of scale occur when increasing production leads to a lower average cost per unit, which is the case here as the cost increase is proportionally less than the output increase.

A Firm Is Producing 10,000 Units of Output at a Total