If a firm doubles its output in the long run and its unit costs of production decline, we can conclude that

Question

Quizplus · Accepted Answer

Economies of scale occur when increasing production leads to a lower cost per unit. This is because fixed costs are spread over more units of output, and in some cases, because of increased operational efficiency. If a firm doubles its output and sees a decline in unit costs, it is experiencing economies of scale.

If a Firm Doubles Its Output in the Long Run