If an industry exhibits economies of scale, one larger firm may be able to produce goods at a lower long-run average cost than two smaller firms.

Question

​If an industry exhibits economies of scale, one larger firm may be able to produce goods at a lower long-run average cost than two smaller firms.

Quizplus · Accepted Answer

Economies of scale refer to the cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output generally decreasing with increasing scale. Therefore, one larger firm can often produce goods more efficiently and at a lower long-run average cost than two smaller firms, due to factors like better utilization of production facilities, spreading fixed costs over more units of output, and stronger bargaining power with suppliers.

​If an Industry Exhibits Economies of Scale, One Larger Firm

If an Industry Exhibits Economies of Scale, One Larger Firm