One reason that a firm may experience increasing returns to scale is that greater levels of output make it possible for the firm to
A) employ more specialized machinery.
B) obtain bulk purchase discounts.
C) employ a greater division of labor.
D) All of the above are correct.

Question

Quizplus · Accepted Answer

All the options listed (employing more specialized machinery, obtaining bulk purchase discounts, and employing a greater division of labor) are reasons why a firm may experience increasing returns to scale as they all contribute to more efficient production processes that lower the average cost per unit as the scale of production increases.

One Reason That a Firm May Experience Increasing Returns to Scale