Economies of scale can arise from:
A) cost reductions gained through decreased production.
B) high prices on bulk purchases of raw material inputs and component parts.
C) an advantage gained by spreading fixed production costs over a large production volume.
D) increased spending on marketing and advertising activities.
E) poor production operations.

Question

Quizplus · Accepted Answer

Economies of scale refer to the cost advantage gained by increasing production volume. This is often achieved by spreading fixed production costs (such as factory rent, equipment depreciation, and administrative salaries) over a larger number of units produced. As a result, the average cost per unit decreases, making it more cost-efficient to produce at higher volumes. Therefore, option C is the correct answer.

Economies of Scale Can Arise From