Suppose that Gigantic Company is increasing in size. As Gigantic Company grows, they are able to buy inputs in bulk, resulting in lower input prices. It is likely that continued growth will result in
A) economies of scale.
B) Gigantic Company achieving the minimum efficient scale of production.
C) diseconomies of scale.
D) increasing marginal returns.

Question

Quizplus · Accepted Answer

Economies of scale refer to the cost savings that occur when a company increases its output and is able to reduce its average cost per unit. When Gigantic Company is able to buy inputs in bulk and benefit from lower input prices, they will be able to produce goods more efficiently, leading to economies of scale.

Suppose That Gigantic Company Is Increasing in Size