Economies of scale occur when the per-unit cost of production falls as a firm's output increases.How is this commonly achieved?
A) when the company suffers from a dip in the demand for its products or services
B) when the company has certain fixed costs that do not change with the rise or fall in units produced
C) when the company has a predetermined order of tasks to be completed
D) when the managers of a company have an autocratic approach to leadership

Question

Quizplus · Accepted Answer

Economies of scale are achieved when the cost per unit of production decreases as output increases. This is because certain costs, such as overhead and capital investments, can be spread out over a larger number of units. This is commonly seen in manufacturing industries where fixed costs, such as equipment and facility costs, remain the same regardless of the level of production. Therefore, as output increases, the fixed costs are spread out over more units, resulting in lower per-unit costs.

Economies of Scale Occur When the Per-Unit Cost of Production