Economies of scale imply that within some range one can increase the size of operation and:
A) total cost will decrease.
B) fixed cost will decrease.
C) average total cost will decrease.
D) average total cost will increase.

Question

Quizplus · Accepted Answer

Economies of scale refer to the cost advantages that occur when a firm increases its production. Within a certain range, the average total cost of production decreases as output increases. This is due to spreading fixed costs, such as equipment or rent, over a larger amount of output. Therefore, the correct answer is (C), average total cost will decrease.

Economies of Scale Imply That Within Some Range One Can