Economies of scale exist when
A)total cost decreases as output increases.
B)long-run average cost decreases as output increases.
C)marginal cost decreases as output increases.
D)fixed cost decreases as output increases.

Question

Quizplus · Accepted Answer

Economies of scale refer to the situation where the cost per unit of output decreases as the scale or size of production increases in the long run. This is due to various factors such as specialization, increased use of machinery and equipment, and better utilization of resources. As a result, the long-run average cost curve slopes downwards and shows economies of scale. A and C are incorrect because total cost and marginal cost could increase or decrease with output, depending on the nature of costs, while D is incorrect as fixed costs remain constant with changes in output in the short run.

Economies of Scale Exist When