Refer to Figure 21.5. Economies of scale occur in the following range of factory sizes
A) #1 to #2.
B) #1 to #3.
C) #3 only.
D) #1 to #5.

Question

Refer to Figure 21.5. Economies of scale occur in the following range of factory sizes
A) #1 to #2. 
B) #1 to #3. 
C) #3 only. 
D) #1 to #5.

Quizplus · Accepted Answer

The graph shows that economies of scale occur from factory #1 to factory #3, as the average cost per unit decreases as the factory size increases within this range. Beyond factory #3, the average cost per unit remains relatively constant, indicating that there are no further significant economies of scale. Therefore, the correct answer is B.