Economies of scale are:
A)unit cost increases associated with learning effects.
B)unit cost reductions due to inferior quality of products.
C)realized when output is reduced to a minimum.
D)realized when the selling price is equal to the cost price of the products.
E)unit cost reductions associated with a large-scale output.

Question

Economies of scale are:
A)unit cost increases associated with learning effects.
B)unit cost reductions due to inferior quality of products.
C)realized when output is reduced to a minimum.
D)realized when the selling price is equal to the cost price of the products. 
E)unit cost reductions associated with a large-scale output.

Quizplus · Accepted Answer

Economies of scale refer to the benefits or cost advantages that a company can achieve by increasing the scale of production or output. The larger the scale of production, the lower the unit cost of producing each product, as fixed costs are spread over a larger number of units. Therefore, option E is the correct choice as it describes the unit cost reductions associated with a large-scale output.

Economies of Scale Are