A delivery company lowers its automobile insurance costs as it increases in size because as the size of the fleet of delivery trucks increases, the premium per driver decreases substantially. This is an example of
A) constant returns to scale.
B) diseconomies of scale.
C) economies of scale.
D) diminishing marginal returns.

Question

Quizplus · Accepted Answer

Economies of scale occur when increasing the scale of production leads to a decrease in the average cost of production, as demonstrated by the reduced insurance premium per driver with a larger fleet size.

A Delivery Company Lowers Its Automobile Insurance Costs as It