Which of the following paired concepts are equivalent to each other?
A)constant costs; economies of scale
B)decreasing returns; decreasing costs
C)increasing returns; increasing costs
D)decreasing costs; economies of scale
E)increasing returns; diseconomies of scale

Question

Quizplus · Accepted Answer

Decreasing costs and economies of scale are equivalent concepts, as the latter refers to the ability of a firm to produce at a lower cost per unit as it increases its scale of production. This occurs due to factors such as specialization, bulk buying, and spreading fixed costs over a larger output. Decreasing returns or increasing costs, on the other hand, occur when the firm's output increases but its costs per unit also increase, which could happen due to factors such as diminishing marginal productivity or inadequate resources. Increasing returns and diseconomies of scale also refer to different phenomena, where the former describes a situation where the firm's output increases at a faster rate than its inputs, while the latter refers to a situation where costs per unit increase as the firm's output increases beyond a certain level.

Which of the Following Paired Concepts Are Equivalent to Each