The table given below shows the average total cost of production of a firm at different levels of the output.Table 8.5

-If a firm experiences economies of scale,
A)it moves up along the long run average total cost curve.
B)expansion of output becomes more expensive for the firm.
C)the firm can reduce its per unit cost by producing less.
D)the firm must shut down in the long run.
E)the firm can reduce its per unit cost by expanding production.

Question

The table given below shows the average total cost of production of a firm at different levels of the output.Table 8.5
 
-If a firm experiences economies of scale,
A)it moves up along the long run average total cost curve. 
B)expansion of output becomes more expensive for the firm. 
C)the firm can reduce its per unit cost by producing less. 
D)the firm must shut down in the long run. 
E)the firm can reduce its per unit cost by expanding production.

Quizplus · Accepted Answer

When a firm experiences economies of scale, it means that the per unit cost of production decreases as the firm expands its production. This is because the fixed costs are spread over a larger output, leading to lower average total cost. Therefore, the firm can reduce its per unit cost by expanding production.

The Table Given Below Shows the Average Total Cost of Production