Economies of scale:
A)are available to small firms but not to large firms due to management inefficiencies.
B)can be avoided by purchasing supplies and raw materials in large quantities.
C)help explain the success of small businesses.
D)are achieved when a firm reduces its average cost of production as they produce more.

Question

Quizplus · Accepted Answer

Economies of scale refer to the cost advantages a firm experiences as it increases production. This is due to spreading fixed costs over a larger quantity of output, taking advantage of specialization and division of labor, and negotiating better deals on supplies and raw materials. As the firm produces more, its average cost of production decreases, resulting in greater efficiency and profitability. Therefore, the correct option is D.

Economies of Scale