Electric utility companies have built larger and larger electricity generating stations and, as a result, the long- run average cost of producing each kilowatt hour has decreased. This is an example of
A) constant returns to cost.
B) economies of scale.
C) increasing returns to cost.
D) diseconomies of scale.

Question

Quizplus · Accepted Answer

This is an example of economies of scale, where increasing the scale of production leads to a decrease in the long-run average cost of producing each unit (in this case, each kilowatt hour).

Electric Utility Companies Have Built Larger and Larger Electricity Generating