Which of the following shows an economy experiencing ―economies of scale‖? I. Farmers practice collectivized farming on large farms. II. The use of technology allows a single wheat farmer to run a farm that is five times its original size. III. Using two fishermen per boat instead of one increases the number of fish caught in a given period of time by 300 percent.

Question

Quizplus · Accepted Answer

"Economies of scale" refers to the cost advantage that arises when the production of goods is increased. Both II and III in the given options show examples of economies of scale. In option II, the use of technology allows a single wheat farmer to manage a farm that is five times its original size, which would increase the overall production of grain and thus, reduce the cost of production per unit. Similarly, in option III, the use of two fishermen in one boat increases the quantity of fish caught for the same amount of time or effort and thus, lowers the cost per fish. Option I does not mention any cost advantage or an increase in production efficiency.

Which of the Following Shows an Economy Experiencing ―Economies of Scale‖