Industries where economies of scale exist will tend to be
A) dominated by either a single firm or a few firms.
B) resistant to cutting price.
C) comprised of many equal-sized firms.
D) less concerned with expanding output.
E) highly profitable.

Question

Quizplus · Accepted Answer

When economies of scale exist, larger production leads to lower average cost. This means that bigger firms can produce and sell at a lower cost than smaller firms. As a result, larger firms have an advantage in being able to offer lower prices and still make a profit. This leads to fewer firms dominating the industry because smaller firms cannot compete on price.

Industries Where Economies of Scale Exist Will Tend to Be