The In the News article "XM-Sirius Merger Made Simple: One Is Always Less Than Two" discusses the proposed merger of two satellite radio companies. In some industries, mergers can be economically justified if economies of scale
A) Lower the average cost of production.
B) Result in more product variety.
C) Act as a barrier to entry.
D) Increase the total cost of production.

Question

Quizplus · Accepted Answer

Economies of scale refer to the cost advantages that a firm can achieve by increasing its production levels. As output increases, the average cost of production decreases due to spreading fixed costs over a larger output. This can result in lower costs and higher profit margins for the merged company, making the merger economically justified.

The in the News Article "XM-Sirius Merger Made Simple: One