Economies of scale refer to the range of output over which
A)long-run average cost rises as output increases.
B)marginal cost exceeds average cost.
C)long-run average cost falls as output increases.
D)the marginal product of labour decreases.
E)marginal product equals average product.

Question

Quizplus · Accepted Answer

Economies of scale refer to the situation where the long-run average cost falls as output increases. This is because as output increases, the fixed costs are spread over a larger number of units, leading to lower average costs. This can enable firms to produce and sell more at a lower cost. Option A is incorrect because economies of scale imply that long-run average cost falls as output increases. Option B is incorrect because it refers to the situation where marginal cost exceeds average cost, which is not necessarily related to economies of scale. Option D is incorrect because it refers to the law of diminishing marginal returns, which is a different concept. Option E is incorrect because it refers to the relationship between marginal and average product, which is not related to economies of scale.

Economies of Scale Refer to the Range of Output Over