If a firm increases its output and its average cost decreases, the firm is experiencing which of the following?
A) Increasing marginal returns
B) Diseconomies of scale
C) Decreasing cost of marginal returns
D) Random luck
E) Economies of scale

Question

Quizplus · Accepted Answer

When a firm increases its output and its average cost decreases, it is experiencing economies of scale. This means that the cost per unit of production is decreasing as output increases, which is often seen in larger firms as they are able to take advantage of specialization, bulk purchasing, and other efficiencies.

If a Firm Increases Its Output and Its Average Cost