When there are external economies of scale,an increase in the size of the market will
A) increase the number of firms and lower the price per unit.
B) increase the number of firms and raise the price per unit.
C) decrease the number of firms and raise the price per unit.
D) decrease the number of firms and lower the price per unit.
E) not affect the number of firms, but will lower the price per unit.

Question

Quizplus · Accepted Answer

External economies of scale mean that as the industry grows, the average costs of production decrease. This typically leads to more firms entering the market due to lower costs and increased profitability, which in turn increases competition and lowers the price per unit.

When There Are External Economies of Scale,an Increase in the Size