Related to the Economics in Practice on page 196. The search engine business, which includes companies like Google and Bing, is subject to economies of scale. This means that as the use of a search engine such as Google ________, the long-run cost to provide additional searches on this engine will likely ________.
A) increases; rise
B) increases; fall
C) decreases; fall
D) increases or decreases; stay the same

Question

Quizplus · Accepted Answer

Economies of scale refer to the cost advantage experienced by a firm when it increases its level of output. The advantage arises due to the inverse relationship between per-unit fixed cost and the quantity produced. The greater the quantity of output produced, the lower the per-unit fixed cost. Therefore, as the use of a search engine like Google increases, the long-run cost to provide additional searches on this engine will likely fall, because the fixed costs of running the search engine (like server maintenance and software development) are spread over a larger number of searches.

Related to the Economics in Practice on Page 196