The fact that a single large factory may be more efficient than several smaller factories of the same total capacity is a reflection of
A) increasing returns to scale.
B) the law of diminishing marginal returns.
C) comparative advantage.
D) the crowding-out effect.
E) reproduction cost of assets.

Question

Quizplus · Accepted Answer

Increasing returns to scale refer to the situation where an increase in inputs leads to a more-than-proportional increase in outputs. This means that a single large factory may be more efficient than several smaller factories of the same total capacity due to economies of scale, including lower unit costs, better utilization of resources, and reduced duplication of facilities and overhead costs.

The Fact That a Single Large Factory May Be More