A firm has _____ when it is able to spread fixed costs over a greater quantity of output if it increases output, but it has _____ when output increases long-run average total costs.

Question

Quizplus · Accepted Answer

A firm experiences economies of scale when it can spread fixed costs over a larger quantity of output, reducing the cost per unit as output increases. Diseconomies of scale occur when increasing output leads to higher long-run average total costs, often due to inefficiencies that arise at higher levels of production.

A Firm Has _____ When It Is Able to Spread