Economies of scale are said to exist whenever:
A) the learning curve is upward-sloping.
B) increases in output bring about higher output.
C) increases in output bring about higher input prices.
D) the elasticity of total cost with respect to output is greater than 1.
E) the long-run average cost curve is downward-sloping.

Question

Quizplus · Accepted Answer

Economies of scale occur when the long-run average cost (LRAC) curve slopes downward. This means that as output increases, the cost per unit of output decreases due to factors such as increased specialization, more efficient use of resources, and spreading of fixed costs over a larger output. Therefore, E is the best choice. The other options are incorrect because they do not correspond to the definition of economies of scale.

Economies of Scale Are Said to Exist Whenever