What is a plausible explanation of a cost function has a slope coefficient of $30 for purchases of 1 to 1,000 units and $25 for production of 1,100 - 2,000 units, and $20 for production of 2,001 - 3,000 units
A) the fixed cost per unit has decreased because of efficiencies
B) economies of scale allowing for lower cost purchases with larger orders
C) their is a linear cost function in effect
D) contribution margins are decreasing

Question

Quizplus · Accepted Answer

The decreasing slope coefficient suggests that there are economies of scale in effect, which means that larger orders result in lower costs per unit. Therefore, purchasing or producing more units at once results in lower costs.

What Is a Plausible Explanation of a Cost Function Has