When carmakers began to cut the costs of producing cars by designing the chassis, engines, and transmissions so that different models could be produced on the same assembly line, production costs fell $240 per car. This idea best illustrates:
A) economies of scale.
B) diseconomies of scale.
C) constant returns to scale.
D) diminishing marginal product.

Question

Quizplus · Accepted Answer

Economies of scale occur when the cost per unit of production decreases as the scale of production increases. By using the same assembly line for different models, carmakers reduce costs, illustrating economies of scale.

When Carmakers Began to Cut the Costs of Producing Cars