In some industries where firms experience declining average total costs over the full range of output that consumers are willing to buy,
A) a smaller firm will always have lower per-unit costs.
B) many firms will tend to emerge from the competitive process.
C) a single large firm will develop, and it will have cost advantages that protect it from potential rivals.
D) a single large firm will develop, and it will buy out any smaller rival firms to avoid the small firms' production at a lower per-unit cost.

Question

Quizplus · Accepted Answer

When firms experience declining average total costs over the full range of output, it indicates economies of scale. A single large firm can produce at a lower average cost than smaller firms, giving it a competitive advantage and protecting it from potential rivals.

In Some Industries Where Firms Experience Declining Average Total Costs