A firm notices that when it increases output beyond an initial level $Q _ { 1 }$, average total cost decreases. For this firm, the region of output beyond $Q _ { 1 }$ is characterized by:
A) economies of scale.
B) diseconomies of scale.
C) constant economies of scale.
D) the minimum efficient scale.

Question

Quizplus · Accepted Answer

When a firm experiences a decrease in average total cost as it increases output, it is experiencing economies of scale. Therefore, the correct answer is A. When a firm increases output and average total cost decreases, it is experiencing economies of scale. This means that as the firm produces more, it is able to reduce its per unit costs. Therefore, the region of output beyond Q1 is characterized by economies of scale.

A Firm Notices That When It Increases Output Beyond an Initial