Economies of scale occur where
A)long-run average cost falls as new firms enter the industry
B)short-run average cost falls as new firms enter the industry
C)long-run average cost falls as one firm expands plant size
D)short-run average cost falls as one firm expands plant size
E)long-run average cost rises as one firm expands plant size

Question

Quizplus · Accepted Answer

Economies of scale occur in the long run because they involve increasing the size of the plant or firm, which cannot be done in the short run. As the firm expands in the long run, it can take advantage of economies of scale, such as spreading fixed costs over a larger output, buying inputs in bulk at lower prices, and using more specialized machinery and equipment. This results in a lower long-run average cost for the firm.

Economies of Scale Occur Where