You overhear a businessman say: "We want to be big because there are economies associated with bigness." What he means is that
A) total cost decreases as more is produced.
B) long-run average cost decreases as more is produced.
C) marginal cost decreases as more is produced.
D) total fixed cost decreases as more is produced.

Question

Quizplus · Accepted Answer

The statement mentions "economies associated with bigness," which refers to economies of scale. Economies of scale refer to the concept that as a company grows in size and produces more goods, its long-run average cost (LRAC) decreases due to factors such as better utilization of resources, specialization of labor, and higher bargaining power. Therefore, the correct option is B - long-run average cost decreases as more is produced.

You Overhear a Businessman Say: "We Want to Be Big