Economies of scale refer to
A)the minimum point on the short-run average total cost curve.
B)the flat portion of the long-run average total cost curve.
C)a decrease in the long-run average total cost of production as output increases.
D)the maximum point on the short-run average total cost curve.

Question

Quizplus · Accepted Answer

Economies of scale refer to a decrease in the long-run average total cost of production as output increases. This occurs due to factors such as specialization, greater use of technology, and bulk purchasing, which allow a firm to produce more efficiently as it grows in size. Option A and D refer to the points where the short-run average total cost curve reaches its minimum and maximum points, respectively, and is not related to economies of scale. Option B describes the constant returns to scale portion of the long-run average total cost curve, where the cost per unit of output remains constant as the firm expands, and is also not related to economies of scale.

Economies of Scale Refer to